Business units
BUSINESS UNITS (BUSINESS ORGANISATION)
General introduction
Business organization in a mixed economy like Cameroon consists of private and public enterprises . Businesses operated by private individuals include sole trader, partnerships, joint stock companies and cooperative societies. On the other hand public enterprises include public corporations, nationalized industries, & municipal undertakings. Sometimes, both the government and private individuals may own and run a business and it is referred to as “parastatals”
Types of Businesses Organization
1) The sole trader (proprietorship) or one man business
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It is a type of business owned by a single individual. freeHe provides the capital, takes decisions and assumes all risks as well as all the profits.. It is the oldest and simplest form of business. The main aim is to make profits. His sources of capital include past savings, retained profits, loans from “njangi” houses and credit union loans.
Advantages
a. Rapid decision making;
b. Easy formation.
c. He enjoys all the profits alone
d. Easy management since the business is small in size
e. Financial accounts are kept secret.
Disadvantages
i. Inadequate capital for expansion; ii. Lack of limited liability; iii. limited continuity( limited life span); iv. He has little time to rest;
v. There is risks of quick decision vi. Profits are small vii. Vii. Lack of specialization benefits viii. Absence of economies of scale
PARTNERSHIP BUSINESS
This is a business form between two or more persons with the objective of making profits. There are two types of partnership: ordinary partnership and limited partnership.
A partnership like the sole proprietor is an unincorporated business it is not regarded as a person in law. Therefore, the business is not separate from the owners except for limited partnership. A partnership has a minimum membership of two. Partnership for commercial purposes must have a maximum number of twenty members.
Types of partnerships
Ordinary partnership
In this type of partnership, all partners have equal legal responsibilities and therefore every partner has the right to manage the business, take decisions and enter into contracts which are binding on all members. All partners are liable for the firm’s debts (have unlimited liability)
Limited partnership
Limited partners have limited liability and do not participate in the management of the business.
The Types of partners in a partnership business include:
The general partner
(active or ordinary partner)
Limited liability artner. He does not take active part into the business.
-Nominal partner (quasi partner): He lends his name to the business without having any real interest in it. He may receive an annual salary and may be liable for the debts of the business.
THE DEED OF PARTNERSHIP
It is a written agreement which states the rights of the partners in a partnership, as agreed between them.
This agreement carries details such as the -kind of business
• names and numbers of members
• The subscribed capital
• The rate of interest to be paid on capital -The mode of sharing profits.
• What happens in the event of dissolution of the partnership? Sources of capital for partnership business
a) Contributions from partners:
b) Bank loans; C) retained profits;
d) Trade credit
e) Grants and subsidies from the government
Advantages of partnership
• More capital is available unlike in sole proprietor
• There are greater prospects of business continuity unlike in sole proprietor
• There is limited liability benefits enjoyed by limited partners
• Business losses are shared by partners: The is better decision making (people with different ideas and experiences are able to produce better results)
• The benefits of specialization (each member is able to specialise in one aspect or the other, which enables the advantages of division of labour and specialisation to be enjoyed)
• Economies of scale is enjoyed (as a result of increased capital, there is large scale production which enables the firm to enjoy the advantages of large scale production)
Disadvantages
• Ordinary partners have unlimited liabilities, -Higher possibility of slow decision taking; -There is limited capital as compared to Joint stock companies
• Disagreements are common and may result in the breakup of the business, Problems of continuity (the death or withdrawal of an influential partner may lead to the end of the business)
• The actions of irresponsible partners are bound to affect all the partners
3) Joint stock company (limited liability Company)
This is an association of people who contribute towards a Joint stock of capital to carry on a business with the aim of making profits. It is a legal entity capable of entering into contracts. It should constitute of at least two shareholders.
Sources of capital include for joint stock company include: sale of shares, bank loans, retained protits, government aid
The formation of a limited Liability company
Before a company is form it require
1) Memorandum of Association
It governs the external relationship of the company i.e the relationship with the outside world.
2) Article of Association.
It is a document which governs the internal relationship of the company with its members. It contains how meetings are to be conducted, voting rights, the powers and duties of directors and shareholders:
3) Certificate of incorporation.
With this document a private company can start business immediately but the public company will have to be issued with the certificate of trading before it starts business.
4) Prospectus
.
This document is issued by the PLC inviting the public to buy or take up shares in the company.
5) Certificate of Trading.
When the company sends to the registrar of companies a copy of its prospectus, which states how the company has raised its capital, it receives a trading certificate.
This authorizes a PLC to start business.
more notes at GCE REVISION and kawlo application
