Introduction to Business Org. & Mgt.

7/30/2019 Introduction to Business Org. & Mgt.

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Introduction to Business O&M


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What?

Business

Commerce

Trade

Profession


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Business

A commercial or industrial enterprise and the

people who constitute it;

The activity of providing goods and services

involving financial and commercial and

industrial aspects


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Commerce

Transactions (sales and purchases) having the

objective of supplying commodities (goods

and services)


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Trade

Barter: An equal exchange

Exchange or give (something) in exchange for

Exchange (buying and selling on domestic orinternational markets) of goods and services

Deal: A particular instance of buying or selling

Craft: people who perform a particular kind ofskilled work; "he represented the craft of

brewers"; "as they say in the trade"


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Profession

The body of people in a learned occupation

An occupation requiring special education


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Define Business

A business (company, enterprise or firm) is alegally recognized organization designed toprovide goods and/or services to consumers.

A business is typically formed to earn profit thatwill increase the wealth of its owners and growthe business itself

The owners and operators of a business have as

one of their main objectives the receipt orgeneration of a financial return in exchange forwork and acceptance of risk


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Objective

A business is typically formed to earn profit

that will increase the wealth of its owners and

grow the business itself

The owners and operators of a business have

as one of their main objectives the receipt or

generation of a financial return in exchange

for work and acceptance of risk


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Types of Business

Agriculture

Mining

Financial (Banking, Non Banking)

Manufacturing (FMCG, CD, CG etc.)

Services (Financial, IT, IPM, Entertainment, Marketing,Foods, Consulting etc.)

Sales Oriented (Distribution, Retail, Franchising etc.)

Real Estate (Commercial, Residential)

Transportation

Utilities

Governmental


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Basic Forms of Ownership

Sole proprietorship

Partnership

Corporation

Cooperative


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Forms of Ownership

Sole proprietorship: A sole proprietorship is a business owned by one

person. The owner may operate on his or her own or may employ others.

The owner of the business has personal liability of the debts incurred by

the business.

Partnership: A partnership is a form of business in which two or more

people operate for the common goal which is often making profit. In most

forms of partnerships, each partner has personal liability of the debts

incurred by the business. There are three typical classifications of

partnerships: general partnerships, limited partnerships, and limited

liability partnerships.


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Forms of Ownership

Corporation: A corporation is either a limited or unlimited liability entity

that has a separate legal personality from its members. A corporation can

be organized for-profit or not-for-profit. A corporation is owned by

multiple shareholders and is overseen by a board of directors, which hires

the business's managerial staff. In addition to privately-owned corporate

models, there are state-owned corporate models.

Cooperative: Often referred to as a "co-op", a cooperative is a limited

liability entity that can organize for-profit or not-for-profit. A cooperative

differs from a corporation in that it has members, as opposed to

shareholders, who share decision-making authority. Cooperatives aretypically classified as either consumer cooperatives or worker

cooperatives. Cooperatives are fundamental to the ideology of economic

democracy.


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Sole Proprietorship

Advantages

Quicker Tax Preparation: As a sole proprietor, filing your taxes isgenerally easier than a corporation. Simply file an individual incometax return including your business losses and profits. Your individualand business income are considered the same and self-employed

tax implications will apply. Lower Start-up Costs: Limited capital is a reality for many start ups

and small businesses. The costs of setting up and operating acorporation involves higher set-up fees and special forms. It's alsonot uncommon for a lawyer to be involved in forming a corporation.

Ease of Money Handling: Handling money for the business is easierthan other legal business structures. No payroll set-up is required topay yourself. To make it even easier, set up a separate bank accountto keep your business funds separate and avoid co-minglingpersonal and business activities.


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Disadvantages

Personally Liable: Your small business in the form of a sole proprietorship ispersonally liable for all debts and actions of the company. Unlike a corporation orLLC, your business doesn't exist as a separate legal entity. All your personal wealthand assets are linked to the business. If you operate in a higher risk business suchas manufacturing or consumables, the cost to benefit ratio is favourable toward acorporate structure.

Lack of Financial Controls: The looser structure of a proprietorship won't requirefinancial statements and maintaining company minutes as a corporation. The lackof accounting controls can result in the demise of your small business. No matterthe legal structure of your business, take time to set up the proper financialstatements for your company.

Lonely at The Top: Being a business of one can be lonely. All the decisions, actions,

and results rest on you. Are you able to work alone and be productive? If not bringin a partner can be necessary for your small business survival.

Difficult to Raise Capital: Imagine your business in 5 years. Will it still be abusiness of one? Growing your small business will require cash to take advantageof new markets and more opportunities. Outside investors will take your companymore serious if you are a corporation.


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Partnership

Advantages

You have a shared financial commitment.

You can pool resources, expertise, andstrengths.

There are limited start up costs.

There are few formalities (mostly applicablelicenses).


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Disadvantages

Partners may have different visions or goals for the business.

There may be unequal commitment in terms of time and finances.

There may also be personal disputes.

Partners are personally liable for business debts and liabilities. Each partner may also be liable for debts incurred, decisions made,

and actions taken by the other partner or partners.

At some time, there most certainly will be disagreements inmanagement plans, operational procedures, and future vision forthe business.

You may encounter difficulty in attracting investors.


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Pvt. Limited Company

Advantages

Limited Liability

Legal Entity Status

Perpetual Succession

Project Cost and Risk Sharing

Transfer of Ownership

Public / Private Borrowing

Taxation


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Disadvantages

Elaborate setting up process

Costly Several regulations and filings

Greater statutory surveillance


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Cooperatives

Advantages

Act as 'schools of democracy' due to their democratic member control.

Inclusive and open membership.

Facilitate up skilling and capacity building due to their principle of'education, training and information'.

Lower economic vulnerability due to risk pooling.

Greater generation of ideas and debate due to existence of multipleowners.

Allow for greater input into policy dialogues due to their tendency tofederate into larger bodies at national and international levels.

Collective action can open up national and international markets, as seen

with many examples in the fair-trade market. Lower input and distribution costs due to greater economies of scale.


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LLP: Limited Liability Partnership

Disadvantages

Some Personal Liability While some states restrict liability of partners in alimited liability partnership, some do not. For example, some states limitliability only for negligent civil wrongdoings but allow personal liability forintentional torts or criminal actions. Other states restrict liability, even forintentional torts--but there may be some situations where personal

liability may arise. Some Restrictions Some states restrict the types of professions that may

form a limited liability partnership. Traditionally, professional fields ofstudy, such as attorneys, architects and accountants, are included. Somestates limit limited liability to these traditional fields.

Liable for Partner's Actions The partnership will be liable for actions taken

by a partner in furtherance of the partnership. This means that financially,being a member of a limited liability partnership may be less secure thanmerely being a shareholder of a corporation.

Introduction to Business Org. & Mgt.

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