Business Management for IT - Type of Business Organization

 Type of Business Organization

1. Service providing business organization
2. Manufacturing organization
3. Trading organization

principal forms of business organization

• sole proprietorship
• Partnership
• Companies
• Non - profit making organization

Sole proprietorship

• The most simple and common forms of the business
• Owned and control by an individual
• The low basically treats business and owner as one and the same
• Unlimited liability
• The business carried on its own name 

Advantages of sole proprietorship

• All profit belong to owner.
• Your are the boss.
• starting cost is low.
• operating cost is low.

 Disadvantages of sole proprietorship

• All loss are belong to owner.
• No continuous existence.
• Capital is limited because one owner.
• Unlimited liability.

Partnership

* A partnership is agreement between two or more persons to operate a business and minimum number of partners are two and also maximum number of partners are 20.Partners should make agreement for making decisions. 

• how loss and profit shared among the partners.
• how much money they need to invest to the business.
• their responsibility of the management 

* And also partnership has unlimited liability. 

* widely use for small business and professional practices.

* Partnership dissolves when partner dies or the time period over(expiration of the specified time period).

* no legal personality.

Advantages of partnership

• there is ability to collect more capital for the business because there is two or more partner.
• partnership can start is very easy because there is more capital.
• liability separate among the partners.
• get more efficient and effective decisions with partners because all partners are contribute for decision making.
• legal effect is in low level.

 Disadvantages of partnership

• no perpetual life(there is no continuous existence).
• unlimited liability.
• complexity of profit distribution.
• no legal personality

Company

• companies limited by shares.
• companies limited by guarantee.
• companies with unlimited liability.

Limited company

• These organization should incorporate under the "companies Act no 7 of 2007" .
• The liability of the shareholder of corporation is limited to the amount of their capital contribution.
• The company has separate legal personality.
• The company raise more funds.
• Separate of ownership and management.
• perpetual life.(continuous existence) .

Limited company can divide under two parts 

1. Private limited companies
2. public limited companies

Private Limited Companies

• Maximum 50 shareholders and should consist at least one director.
• Can not offered shares to sale in general public.
• Limited liability.
• Accounting and auditing is essential.
• legal personality.
• Not allowed to raise funds by issuing debentures.
• The last two word of the name should be either private(Limited) or pvt (Ltd).
• Consent of all shareholders is require to transfer shares to new shareholder. 

Public Limited Companies

• No limit to maximum number of shareholder and should consist at least two director.
• Can offered shares to sale in general public.
• Allowed to raise funds by issuing debentures.
• No restriction to transfer shares to shareholders.
• The last word name should be read as either as "Public Limited Company" or "PLC" if the company is a listed company. If not the name should be as "Limited " or ("LTD").

Advantages of limited company

• Limited liability.
• Less legal impact for shareholders.

 Disadvantages of limited company

• Taking time and tax is high.
• Legal effect is high(legal impact).
• Even when dissolve there is complexity task.
• Voting power is depend on number of shares so if shareholder have less numbers of shares then that shareholder have less voting power.