SOLE TRADER

 A sole trader refers to an individual who is in business on his own. This is somebody
who is self-employed and who usually starts a business with capital from their savings
or by borrowing from friends or a bank.
 A sole trader is not necessarily a one-person business and may have many employees
or branches. However, the business is owned by only one person and it is he/she who
receives all the profits.

ADVANTAGES DISADVANTAGES
Easy to set up. Few legal formalities with a Unlimited liability. He will lose not only
small amount of capital what he has invested in the business but also
his personal possessions should the business
fail.
Independence and quick decision making Lack of continuity. If the owner dies the
business dissolves. LACK OF
PERPETUAL SUCCESSION
Personal contact with customers and Difficulty in obtaining loans. This may limit
employees expansion
Receives all the profits Assumes all risks and losses himself
Satisfaction of being one’s own boss Often has to work long hours
Flexible working hours May often lack managerial skills
Privacy of business affairs

PARTNERSHIP
 A partnership can be described as any business organization with between 2 – 20
members or partners engaged in that business with a view to making a profit.
 People wanting to form a partnership normally draw up a legal document called a
PARTNERSHIP DEED OF AGREEMENT. This is a document that usually sets out
the details of the partnership including the objectives of the firm, how much capital
each partner provides and how profits and losses are to be shared. If, for example no
agreement is made, then profits and losses are to be shared equally (according to the
PARTNERSHIP ACT of 1890).

Types of partners:
1. Ordinary partner-
These play an active part in the business, contributing both capital and time towards the
running of the enterprise.
2. Sleeping partner-
Partners that have a financial interest in a firm but take no interest in the day to day running
of the business.

Limited liability vs unlimited liability partners.

Limited liability partners are those who stand to lose only what they have invested in the
business if it goes bankrupt.
Unlimited liability partners are those who stand to lose all their investment in the business as
well as their personal possessions.
 ADVANTAGES DISADVANTAGES
Easy to form Unlimited liability
More capital brought into the business Lack of continuity of existence
Specialization and division of labour. Each All partners stand to lose if one partner
partner may contribute different skills. makes a mistake
Workload can be shared Disagreements among partners may cause
problems
Privacy of business affairs Loss of individual independence as each
partner must consult the other. Longer
decision making

Capital is still limited

LIMITED COMPANIES
Also known as Joint Stock Companies, are incorporated bodies that have a separate legal
personality from that of the owners.
Formation of companies
Essential information must be forwarded to the Registrar of Companies. To facilitate this two
documents must be drawn up:
1. A Memorandum of Association: governs the external relationships of the company. It
contains the following information:
 The company’s name with “Limited” (ltd) or “Public Limited” (plc) as the last
words according to its status.
 The address of the company’s registered office.
 The objectives of the company.
 The authorized share capital as well as the types of shares to be issued.
 A declaration of limited liability.
2. An Article of Association: governs the internal relationships of the company. It gives
details about the internal rules and regulations such as:
 The procedures for calling annual general meetings.
 The rights and obligations of directors.
 The procedures for election and reelection of directors.
 Borrowing powers of the company
 The division of shares into classes with strict identification of shareholders
rights and priorities.
3. Notice of directors: outlines the directors of the company.
When satisfied that the prospective company has met the legal requirements, the Registrar
will issue a Certificate of Incorporation which allows a Private Limited Company to begin
trading. For a Public Limited Company to begin trading they must issue a prospectus which
gives details about shares on offer. The registrar will then issue a Certificate of Trading
which allows the plc to begin trading.
PRIVATE LIMITED COMPANY
Features:
1. They are usually a family affair
2. End with Limited or ltd for short
3. Has a minimum of 2 and a maximum of 50 members
4. All members have limited liability
5. No prospectus is necessary
6. Not allowed to sell shares to the general public. Shares are not easily transferable
ADVANTAGES DISADVANTAGES
Shareholders have limited liability Capital is still limited (cannot sell to public)
Has separate legal personality Legal formalities in setting up
Continuity of existence / PERPETUAL Shares not easily transferable
SUCCESSION
Control is often retained by original owners Less privacy in financial affairs. End of year
accounts must be filed with the government.
They are available for public inspection
Greater access to capital than smaller org. Decision making process can be slowed.

PUBLIC LIMITED COMPANY

Features:
1. Shareholders have limited liability
2. Name must end with “Public Limited Company” or plc as its abbreviation.
3. Can advertise shares to the public
4. The minimum is 2 and no maximum
5. Shares can be freely bought or sold on the stock exchange
ADVANTAGES DISADVANTAGES
Limited liability for shareholders Many legal formalities
Separate legal identity Less privacy in financial affairs. End of year
accounts must be filed with the government.
They are available for public inspection
Continuity of existence Risk of takeovers
Access to greater capital Divorce between ownership and control
Shares are easily transferable Prone to diseconomies of scale
 Capable of employing better experts Share price are subject to fluctuation,
sometimes for reasons beyond the company
control
Benefits from economies of scale

PUBLIC AND STATE CORPORATION

State corporations are usually non-profit legal entities which are formed by laws passed in
parliament and are financed partially or fully by government. In the long term they are self-
financed. Although these organizations are funded by government in the short term, they are
considered to be independent organizations as their daily operations are not controlled by the
government, but are managed by a Board of Directors. However, their financial statements
are audited by state – or government – appointed auditors.
Their function is to provide necessary services to the public such as the provision of public
information and managing public utilities.
Advantages Disadvantages
They are financed by the government They might be inefficient
Loss making firms may still be kept There is little incentive to be efficient as the
functional if the benefit to society is greater state provides the funding
than cost of production
They provide services to the society that are Members of the Board may be politically
not served by profit maximizing private firms affiliated
Resources of the state are used for the There may be too much government
economy as a whole interference

STATUTORY BOARDS/ BODIES

These are usually nonprofit agencies that are established by the government and also financed
by the government. However, they are considered independent organizations as their daily
operations are not controlled by the government but by a Board of Directors.
Their function is to provide public services which the government believes will be carried out
more efficiently outside the traditional government department structure. They often ensure
that the activities of business organizations are legal or within the scope of the law.
NON-PROFIT ORGANIZATIONS
Not-for-profit organizations are types of organizations that do not earn profits for its owners.
All of the money earned by or donated to a not-for-profit organization is used in pursuing the
organization's objectives and keeping it running. Is a business that is set up to pursue
objectives that benefit society.
Typically, organizations in the nonprofit sector are tax-exempt charities or other types of
public service organizations, and as such, they are not required to pay most taxes. In a
nonprofit organization, income is not distributed to the group's members, directors, or
officers. Some well-known nonprofit organizations include the American Red Cross, United
Way, and the Salvation Army.
A charity is an example of a not for profit organization.
Features of charities include:
 The objective is to create an awareness of the plight of the disadvantaged in society
 They obtain funding from fund raising events they organize from donations
 They do not pay taxes
 Businesses can claim any donations to charities as a tax deduction

Pros of Non Profit Organizations

Nonprofits are eligible for benefits that do not apply to for-profit organizations because they
work towards the public good. Let’s take a look at a few of their benefits.

1. Tax-Exempt Status
A nonprofit qualifies for favored tax status; it is exempt from federal, state and local taxes.
This tax-exempt allows nonprofit organizations to use more of their financial resources on
accomplishing their goals.

2. Limited Liability
A non profit organization limits personal liability; the members of the nonprofit receive
protection from personal liability. For instance, if a legal judgment exceeds what the
nonprofit can pay, the claimant won’t be able to collect the remainder from the organization’s
members.
Unless a director or an officer causes some kind of harm or fraudulent activity, he/she won’t
be held personally liable.
3. Grants
Another benefit for a nonprofit is that it is eligible for government and private sector grants
and can receive contributions from individuals. Despite the extensive application process, a
grant helps founders with limited funds begin to scale their institutions

4. Founders are Kept Separate from the Organization

In case there is a lawsuit, fine, debt, or similar legal matter involved with the organization,
the personal assets of the individual founders are kept separate from the business structure,
meaning they’re risk-free.
There is an advantage here in the fact that board members and employees of a non-profit
organization receive similar protections. The only issue that pierces this shield is if the
individual in question acts unethically or illegally.

5. Allows You to Do a Good Deed

While working in a for-profit business could just mean paycheck for some, being a part of a
nonprofit makes people feel like they’re contributing to society. Founding a non profit
organization gives them a chance to feel like they are contributing to eliminate an existent
problem in society.

6. Motivation and Leadership

People working for nonprofits claim to feel motivated throughout their work because they
feel like their contribution is treasured.

Since they generally work for the betterment of society, they gain a sense of satisfaction
which motivates them to further keep contributing. Along the way, they develop leadership
skills as well.
Cons of Nonprofit Organizations
Despite the benefits, there are several downsides to starting a nonprofit organization. Some of
them are explained below.

1. Lack of Funds
In non profit organizations, the major source of funds is through donations. You’re asking
people to donate either cash or other assets out of the goodness of their hearts. And, in all
honesty, everyone won’t like the idea of donation. That means funds could be a big issue in
nonprofits.

2. Low Pay
A nonprofit doesn’t reward you as much for your work as a for-profit corporation would. It is
because the profit generated by a nonprofit must be put back into the company operations;
being a part of profit-sharing isn’t possible.

3. Paperwork and Administrative Costs

Compared to the paperwork required in starting a for-profit, the paperwork involved in
starting a nonprofit is more. It requires you to fill up tax forms and nonprofit incorporation to
qualify. To ensure that all the paperwork is filled out correctly, it is better to hire an
accountant and a lawyer. All of this adds up to more fees and requirements.

4. Loss of Tax Status

A non-profit can lose its tax status. If it misses its annual reporting deadline, it may not be
allowed to continue qualifying for its tax-exempt status. The deadlines, in this case, are very
strict.
5. Competition for Funding
As mentioned earlier, non-profit organizations rely on grants, donations, and authorized
investments to fund their affairs. With thousands of agencies competing for these resources,
there is no guarantee of receiving the fund of your choice. You should have a proper business
plan and vision if you want to get noticed.

6. Public Scrutiny
Since a nonprofit is dedicated to the public, its finances are open to public inspection. This
means that the public can get copies of tax returns and can find out its salaries and
expenditure. This could be used against the good of the organization.
MISSION VS VISSION

A mission statement is a concise explanation of the organization's reason for existence. It

describes the organization's purpose and its overall intention. The mission statement supports
the vision and serves to communicate purpose and direction to employees, customers,
vendors and other stakeholders. Questions to consider when drafting mission statements
could include: 

 What is our organization's purpose?

 Why does our organization exist?   

A vision statement looks forward and creates a mental image of the ideal state that the
organization wishes to achieve. It is inspirational and aspirational and should challenge
employees. Questions to consider when drafting vision statements might include:

 What problem are we seeking to solve?

 Where are we headed?

If we achieved all strategic goals, what would we look like 10 years from now.

ADVANTAGES OF STRONG BUSINESS OBJECTIVES

Developing clear business objectives can be very beneficial to your organization. In
particular, business objectives allow management to be more effective when interacting with
employees, which leads to a well-functioning business. One of the biggest advantages of
business objectives is that they can make proper planning easier. With a clear objective in
mind, developing a plan to achieve the objective is much simpler.
Business objectives can also be a useful tool for motivating everyone within your
organization. When they know what they're working towards, as well as the benefits of
achieving the objective, employees at every level of your business will be able to stay on
task.
Coordinating workers in different parts of your organization can be difficult, especially if
those workers don't know what they are trying to accomplish. When you institute firm
business objectives, every manager will know how to direct their employees, and managers in
different departments will be able to coordinate more effectively.

How to Set Goals

If you want to set goals or objectives for your business, there are several methods you could
choose, including the SMART method. Under the SMART method, your business objectives
should be:

 Specific.
 Measurable.
 Attainable.
 Relevant.
The last letter in the SMART method, "T," stands for time frame. With every business
objective that you set, you should be sure that you also institute a time frame for completing
the objective.
Employees can benefit greatly from business objectives, as working towards and completing
objectives can give employees an idea of how they are progressing within the organization.

DISADVANTAGES OF BUSINESS OBJECTIVES

While setting business objectives and goals can be very beneficial, there are also some
disadvantages that you should keep in mind. First and foremost, setting goals can put pressure
on your workers, especially if they had no input in setting the objective. For example, if you
decide that you want your workers to increase their output by 50 percent, they are likely to
feel a great deal of pressure to reach this objective. Such pressure is likely to interfere with
their performance and make achieving the goal more difficult.
Another drawback of business objectives is that they can easily cause your employees to feel
like a failure if they are unable to reach the objective. While your business goals should
certainly be somewhat challenging, they should be achievable. Setting goals that your
employees are unlikely to reach will create a sense of failure that may spread throughout the
organization.
Business objectives can also be demotivating if you don't plan them properly. If an objective
is vague, for instance, it will be difficult for your employees to find the motivation to work
towards the objective. Goals that are unreasonably difficult can also be demotivating. In some
cases, business objectives can cause your employees to ignore other tasks. If an objective is
very important, your employees will likely put all of their efforts towards that one goal,
causing their other duties to fall to the wayside.

MULTINATIONALS
A multinational corporation (MNC) or multinational enterprise (MNE) is a corporation
registered in more than one country or has operations in more than one country. It is a large
corporation which both produces and sells goods or services in various countries

A multinational company (MNC) is a business that has operations in more than one country.
Note that a business does not become an MNC simply because it sells its goods and services
to more than one country. The key to being an MNC is that the business has business
operations in two or more countries.
Key Reasons for the Growth of MNCs
There are many reasons why a business may wish to become an MNC and these factors have
also fuelled the rapid growth of MNCs in recent. decades. These reasons include:
To Operate Closer to Target International Markets
Producing closer to target markets has several potential advantages, including reduced
transport costs (which will be important for bulky goods) and improved market information
and intelligence.
Gaining access to lower costs of production
Many MNCs have taken advantage of lower production costs from operating in developing
economies. In some cases this can be achieved by outsourcing and offshoring production to
suppliers based in those economies. However, for other businesses, it is more beneficial to set
up their own operations in order to service domestic demand as well as supply demand in the
host and nearby countries. Many MNCs now have highly complex supply chains integrating
their operations in many economies.
Avoiding Protectionism
By producing in a host country, an MNC may be able to avoid restrictions on imports such as
tariffs and import quotas..
Key Reasons for the Growth of MNCs
The global economy has witnessed the rapid growth of MNCs for a variety of reasons,
including:
Global brands seeking to drive revenue and profit growth in emerging economies (in
particularly seeking rising demand from increasingly affluent consumers).
The search for economies of scale, whereby MNCs can reduce unit costs by supplying global
demand by concentrating production in a few key international locations.
The perceived need to supplement relatively weak demand in existing, developed economies.

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