Various Types Of Business Organization

Economics

Table Of Contents

  • Sole Proprietorship
  • Advantages Of Sole Proprietorship
  • Disadvantages Of Sole Proprietorship
  • Partnership
  • Features Of Partnership
  • Advantages Of Partnership
  • Disadvantages Of Partnership
  • Joint Stock Companies
  • Types Of Joint Stock Companies
  • The Private Company
  • Advantages Of Private Company
  • Disadvantages Of Private Company
  • Public Company
  • Advantages Of Public Company
  • Disadvantages Of Public Company
  • The Cooperative Society
  • Advantages Of Cooperatives
  • Disadvantages Of Cooperatives
  • Public Enterprises Or Corporation
  • Advantages Of Public Corporation
  • Disadvantages Of Public Cooperation

Production are carried out by various business organizations. They are the following types:

1. Sole Proprietorship

This is also called sole trader. It is a business organization owned, financed and controlled by one man. The owner enjoys all the profit and bears the risk alone.

This is usually small in size and commonly found in West Africa. Examples of one man business include Hairdressing, vulcanizing, Retail shops etc.

Advantages Of Sole Proprietorship

1. It is easy to set up and organize.

2. Quick decisions are easily made.

3. Customers and employees receive quick personal attention.

4. Privacy is enjoyed.

Disadvantages Of Sole Proprietorship

1. Unlimited liability.

2. Insufficient capital.

3. The death of the owner may sometimes lead to the end of the business.

4. Division of labour is not employed.

5. Loss of economies of large scale.

6. Research is not possible due to limited capital.

2. Partnership

Here a minimum of two and a maximum of twenty persons (2-20) agreed legally to own and run a business enterprise as partners. They have joint responsibility for profit or losses as well as risks of the business. Each partner contributions capital and shares profit with other partners according to article of Association or deeds.

Features Of Partnership

1. Its operation is based on the stipulation of the Article of Association or deeds.

2. Some partner may be active or dormant.

3. It is suitable for professional bodies, e.g consultancy services.

Advantages Of Partnership

1. More capital is available.

2. Risks and losses are shared by the partners.

3. It enjoys privacy.

4. Better decisions are made than in one man business.

5. The practice of division of labour is possible.

6. It can raise more fund with ease from banks.

Disadvantages Of Partnership

1. The death of a partner can upset the business.

2. Decision may be delayed.

3. It is not a legal entity.

4. Liability is unlimited.

5. Admission of new partners may be diffiult.

6. Limited capital for expansion.

3. Joint Stock Companies

Joint stock companies also called limited liability companies assets are owned by shareholders.

Joint stock companies are of two types; Private company and Public company.

a. Private Company

The company is formed by 2 to 50 members excluding the employees.

The shareholders may come from the same family. The right to transfer share is restricted because shares are not sold to the public.

Advantages Of Private Company

1. Share holders have limited liability.

2. Relatively more capital can be raised.

3. It is a separate legal entity.

4. Continuitty is ensured even if a share holder dies.

5. Division of labour is practised.

6. Employment of specialists is possible.

7. Private company enjoys economics of scale.

Disadvantages Of Private Company

1. Shares are not sold publicly.

2. Shareholders can not transfer their shares easily.

3. Privacy is not enjoyed.

4. Impersonal relationship between the management and workers.

b. Public Company

This company can be formed by a minimum of seven members and there is no upper limit. It must be registered with registrar of company. Most industries, banks, etc fall within this.

Advantages Of Public Company

1. Public company enjoys limited liability.

2. There is more possibility for capital raising.

3. It enjoys economics of large scale.

4. Practices division of labour.

5. Shares are transferable through stock exchange.

6. Abundant facilities for expansion are enjoyed.

Disadvantages Of Public Company

1. Shareholders do not participate in the runing of the company.

2. Decision making is slow.

3. Privacy is not enjoyed.

4. There is less contact between the workers and the management.

5. Individual initiatives are restricted.

4. The Cooperative Society

Cooperative society is a self help organizations which is formed by consumers or producers with common interest. The aim is to provide the members with services or products.

The members provide most of the finance. The members have equal votes and enjoy all the benefits equally. The business risks are equally borne by the members.

Here are the following types of cooperatives:

a. Consumers Cooperatives

Consumers buy goods in bull at a wholesaler price, and sell to the members at reduced prices.

b. Producers Cooperatives

Many producers may join together to market or produce their products. The aim is to enable the producers to gain control over the market e.g Agricultural products producers.

c. Credit And Thrift Cooperatives

The sole aim of this organization is to make loan available through mobilizing the saving of the individual members, to their members.

Advantages Of Cooperatives

1. Democracy in management and control is assured.

2. Loans are cheaply obtained.

3. There is free entry and exit.

4. Cost of marketing and producing is reduced.

5. Saving are encouraged and used efficiently.

6. Loyalty on the part of members is assured.

Disadvantages Of Cooperatives

1. Dispute may arise among the members.

2. Mutual distrust among members may hinder efficiency operation.

3. The continuity of the society is not always guaranteed.

4. Economics of larges scale are sometimes absent due to limited capital.

5. Public Enterprises Or Corporation

They are business organizations which are financed or managed by the Government or its Agent without profit motive. Example in Nigeria are Water corporation, NEPA etc. They provide essential services and products for the community.

They require large capital and do not have shareholders.

Advantages Of Public Corporation

1. Enjoys economics of scale.

2. Public goods and services are provided at reduced cost and price.

3. It operates without competitors.

4. It can raise large capital with ease.

Disadvantages Of Public Corporation

1. Ethnic and political influences may hinder productivity.

2. Official corruption tend to be the order of the day.

3. Inefficiency on the part of managment.

4. Over depence on Government subvention.

5. Decision making and changes take a long times.

6. Poor attitude to work by employees.

Argument For Public Corporation

1. Large Capital Requirement

Some projects require large capital for their execution. Only the Government can provide such amount of capital.

2. Economic Development

Some projects may not be profitable enough as to attract private individuals attention and execution. Such projects can be carried out for economics development reason e.g Railways, water, corporations Bridges and roads.

3. Solve Unemployment Problems

Government can embark on programmes which will create employment to her applicants.

4. Economics Of Scale Available

Abundant economics of scale will be available due to the large size of the production scale. Such will reduce cost and price.

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