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TYPES OF BUSINESSES

Objectives of Business Organizations

Business organizations are established to meet wants in soci­ety. Private businesses are formed mainly to provide for mate­rial wants (i.e. goods and services) and commercial wants (i.e. banking, insurance) in society. Government Organizations, on the other hand, tend to satisfy society's desire for defence, law and order, education and social welfare.

Organizations are thus established to meet wants in socie­ty. In meeting these, organizations will set very definite and clear aims, e.g. a manufacturing firm will want to stay in business and make a profit. The aims of an organization are normally decided by the board of directors, or in the case of public organizations by government ministers.

The most common forms of private business organizations are sole proprietorships, partnerships and corporations.

Sole Proprietorships

A business owned and controlled by one person is a sole proprietorship. Sole proprietorships are the oldest, simplest, and most common of all types of businesses.

Because the financial resources available to one person often are limited, sole proprietorships tend to be enterprises that require small amounts of capital to start and operate. Many doctors, dentists, lawyers, bakers, and beauticians organize as sole proprietors to provide professional services. Other services offered by sole proprietors include plumbing, carpentry, dry cleaning and lawn care. Many construction companies, small grocery stores, florists, other small retail stores, farms, real estate firms and insurance firms are also organized as sole proprietorships.

Partnerships

A partnership is a business that is owned and controlled by two or more people. As in the case of sole proprietorships, partnerships are concentrated in businesses that require rel­atively small amounts of money to start and operate. Small retail stores, farms and construction companies are often organized as partnerships. People in service occupations, such as doctors, lawyers, accountants, and photographers, also form partnerships. Many of these partnerships may have started as sole proprietorships. A partnership begins when two or more people agree to operate a business together. Partnership can be general or limited. In order to avoid later conflicts, the partners usually formulate a written agreement called a partnership contract. A partnership contract out­lines the distribution of profits and losses. It details the spe­cific responsibilities of each partner and includes provision for adding or dropping partners and dissolving the partner­ship.

Corporations

A corporation is a business organization that is treated by law as if it were an individual person. A corporation can do everything that a sole proprietorship or a partnership can do. It can, for example, buy property and resources, hire work­ers, make contracts, pay taxes, sue others and be sued and produce and sell products. A corporation, however, is owned by stockholders. Stockholders are individuals who invest in a corporation by buying shares of stock. Stocks are the certifi cates of ownership in the corporation. Stockholders invest in a corporation in order to make a profit.

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