DISADVANTAGES OF PRIVATE LIMITED COMPANY

1. Limited capital compared to that of public company: As result of a maximum number of 50

members, the share capital of private limited liability company is limited compared to public
companies whose shareholders are unlimited in number.
2. Delay in decision making: Since so many people are involved in the decision making process, a
lot of time is spent before a final consensus is reached. Also the absence of a prominent
shareholder or members of the board of directors can delay decision making.
3. Shares are not easily transferrable: A shareholder cannot re sell its shares without the approval
of other shareholders or management of the company
4. Less personal relationship with both employees and customers: Due to the large size of the
private limited liability company compared to sole proprietorship and partnership, the
management and the employees are not close.
5. Shares cannot be advertised or sold directly to the public: The marketability of the shares is
limited because the shares cannot be quoted on the stock exchange.

PUBLIC LIMITED LIABILITY COMPANY

Public Limited Liability Company is formed by a minimum of seven people and no maximum,
which make financial contributions to the business and are limited by the monetary value of the
shares they hold.

FEATURES OF PUBLIC LIMITED LIABILITY COMPANY

1. The public limited company has a minimum of seven shareholders and no maximum
2. It can offer its shares to the general public on the stock exchange.
3. Its book of accounts are made public and its audited reports published in the dailies, it sends
audited reports to the registrar of companies as required by the law.
4. A shareholder can transfer his shares to another shareholder or a third party without the approval
of other shareholders.
5. The suffix ‘Public limited company’ (Plc.) is added at the end as part of the name of a public
limited company.
6. A board of directors headed by a chairman is elected by the shareholders to run the organization.
7. The death of any of the stakeholders (that is the shareholders, directors, company secretary and
any other) does not bring the business to an end. The public limited company has an unlimited
life span.
8. The public limited company can sue and be sued.
9. Shareholders jointly bear the business’ risks

SOURCES OF CAPITAL
1. Capital is raised from the sale of the company’s shares on the stock exchange
2. Through loans and overdrafts from financial institutions
3. Ploughed back profits/retained earnings
4. Credit facilities from business’ suppliers.
5. Debentures
6. Equipment leasing
7. Hire purchase

ADVANTAGES OF PUBLIC LIMITED COMPANY

1 Large capital: The Company has huge resources of capital because of the large number of
shareholders and its ability to issue shares to the general public without any restriction. This
enhances the ability of the company to borrow money easily from financial institutions and also
enjoy internal economies of large scale.
2. Shareholders have limited liability: The risks a shareholder bears is limited only to the paid-up
value of its shares, the personal assets are protected by the law from being sold to recover
company’s debt in case of business failure. The only loss that can be incurred is the capital he
has contributed to the business.
3. The company is a separate legal entity: The shareholders cannot be sued in person for any
company’s debt but the company which is viewed as a legal entity can sue and be sued in its own
right as an individual.
4. The company has perpetual existence: The death of a shareholder does not bring the business
operations to an end. There is still continuity in company’s existence.
5. Shares are easily transferrable for cash: Shares can be sold at the stock exchange without the
consent of other shareholders. Shareholders can transfer their shares at will if they feel
dissatisfied with the company
6. There is high degree of specialization: The company is divided into various divisions and
departments handled by different individuals which encourages greater efficiency and
specialization.

DISADVANTAGES OF PUBLIC LIMITED COMPANY

1 Delay in decision making: Due to the unlimited number of shareholders, too much time is
wasted in decision making because before a decision can be made, the shareholders have to be
consulted. This process is usually time-consuming and a consensus is not easily reached.
2. The business lacks privacy: Every year the company publishes an audited account for public
inspection. This does not allow the company to enjoy privacy.
3. No cordial relationship: There is lack of personal contact between the management and
employees and between company and customers, and also between management and
shareholders and even among the shareholders themselves.
4 Management Diseconomies: Some companies might become so large that they become difficult
to manage effectively; there may be communication problems amongst different levels of
management.
5. Difficulty in setting up Joint Stock Company: The legal procedure for setting up a joint stock
company is usually expensive. The formative process involved in setting up the company is also
complex and strenuous.
6. Bureaucracy and bottlenecks: Duties are discharged based on prescribed official procedure and
routine works; this does not give room for new initiatives and creativity in the business.

DIFFERENCES BETWEEN PUBLIC LIMITED LIABILITY COMPANIES AND

PRIVATE LIMITED LIABILITY COMPANIES
1. Number of members: Public company can be formed by a minimum of 7 members with no
maximum, while a private company can be formed by a minimum of 2 members and maximum
of 50 members.
2. Publicity of annual accounts: Public company publishes its accounts to the members of the
public while private company is not obliged to do so.
3. Quotation on stock market: The shares of a public company are quoted on the stock exchange
market but private company shares are not listed.
4. Subscription to shares: Members of the public can be invited to subscribe for shares in a public
limited company while members of the public cannot be invited to subscribe for shares in a
private limited company
5. Issues of debentures: Public limited company issues debentures while private limited company
does not issue debentures.
6. Certificate of Trading: Public company cannot commence business without the certificate of
trading, but a private company can once it has received certificate of incorporation.
7. Holding of statutory meeting: A public company must hold statutory meeting and file a report
whereas it is not required of a private company.

SIMILARITIES BETWEEN PUBLIC LIMITED LIABILITY COMPANIES AND

PRIVATE LIMITED LIABILITY COMPANIES
1. Both companies are not owned by one person.
2. The liabilities of both companies are limited.
3. Both are legal entities.
4. Powers of the companies are exercised through the Memorandum of Association and Articles of
Association.
5. Both companies may be voluntarily or compulsorily liquidated.
6. Both companies are established to make profit.
7. Both set up reserves from their profit which is ploughed back for expansion purposes.
8. Both are controlled by board of directors appointed by the shareholders.

COOPERATIVE SOCIETIES
A cooperative society is a business organization in which a group of individuals who have common
interest mutually agree to come together to promote their economic activities and provide other
welfare benefits to their members.
 Co-operative societies are not necessarily formed to make profit, but if made, they are shared on the
basis of patronage. Examples of cooperative societies in Nigeria include Nigeria Police Cooperative
societies, NNPC Staff Cooperative multipurpose society Ltd, Lagos Mainland Cooperative
Multipurpose society Ltd.
Cooperative societies are governed by the Nigerian Cooperative Societies Act and are registered by
the Director of Cooperatives in each state. In Lagos State, the Ministry of Commerce, Industry and
Cooperatives oversees the registration and regulation of Cooperative Societies.
The cooperative constitution that regulates the activities and operations of the society is called
Cooperative Bylaws, which must be compliant with the Cooperatives Act.

SOURCES OF CAPITAL
1. Members’ contributions
2. Voluntary donations
3. Investments
4. Development/Occasional charges
5. Enrolment/Subscription charges
6. Interest on loans to members and non-members.
7. Loans and overdraft from financial institutions.
8. Government grants
9. Ploughed – back profits.
10. Interest on fixed deposits

CHARACTERISTICS OF CO-OPERATIVE SOCIETIES

1. It is owned by a minimum of two people and no maximum.
2. Membership is open to those who fulfill certain conditions stipulated by the society.
3. They are not necessarily formed to make profit but to promote the economic activities and
welfare of their members.
4. It makes use of the principle of democracy whereby each member has one vote irrespective of
his contribution.
5. Profits if made are shared on the basis of patronage.
6. It is registered under the co-operative law.
7. The liability of members is limited to the amount contributed to the society.
8. It is controlled and managed by a committee set up by the co-operative.
9. It is recognized as a separate legal entity by law.

TYPES OF CO-OPERATIVE SOCIETIES

1. Consumers’ Co-operatives: These are associations of consumers who pool their resources
together to buy goods in bulk at wholesale prices from producers and then sell the goods at retail
prices to members and non-members. The intention is to make the goods readily available to
members at reasonable prices by eliminating the middlemen. Profits are shared among members
in the form of dividends based on how much a member buys.

2. Producers Co-operatives: These are associations of producers who are in the same line of
production who come together to do a joint business. They use their resources collectively to
produce particular products, alternatively may produce separately, but make joint arrangements
for selling the products. They share useful knowledge among themselves. They also enjoy large
scale purchase of raw materials and equipment at reduced price.

3. Credit and thrift co-operatives: They are associations of usually low income earners who
contribute money, the total of which goes to members in turn. Sometimes the money collected
may be given as loan to a needy member at minimal interest. Thus, members are encouraged to
save and they also enjoy a greater bulk of money at a time. Members share profits/surplus made
from venturing into other income-generating activities such as starting their own businesses and
giving loans to non-members at higher rates.
4. Multi-purpose Co-operatives: This is a cooperative movement which combines all the
functions of all other cooperative societies. They engage in any form of profitable business
following the cooperative law and the interest of members.

5. Marketing Cooperatives.
6. Professional Cooperatives.
7. Transport Cooperatives.
8. Company/Place of Work Cooperatives.
9. Trade/Artisan Cooperatives.

ADVANTAGES/ BENEFITS OF COOPERATIVE SOCIETIES

1. Members have equal rights to benefit from the existence of the cooperative society.
2. There is the principle of democracy whereby each member is entitled to only one vote
irrespective of his contribution.
3. It encourages its members to save their money. This is done through the credit and thrift
cooperative society.
4. It educates its members in the area of production, distribution, buying and selling of goods and
services.
5. It makes goods available to members at reduced rates because they buy in bulk which may be
beyond the reach of a single person.
6. Cooperative societies have corporate existence and perpetual succession.
7. They enjoy tax-free profits. This means profits made by cooperative societies are not taxed by
the government.

DISADVANTAGES/ PROBLEMS OF CO- OPERATIVE SOCIETIES

1. Members have other interests and so elected officials may apply themselves to the work on part
time basis.
2. Members being low income earners are unable to subscribe much share capital and so this limits
the development of the co-operative.
3. Problem of maintaining loyalty: Members have other interests and may not give full loyalty to
the cooperative.
4. Competition from other retail outlets which may not allow them to sell at reduced rates.
5. There have been cases of embezzlement of funds by the elected officers who may use the
members’ money in wrong ways for their selfish interest.
6. Officers are to be elected from among the members. It may happen that at any one time there
may not be qualified people and so unqualified people will be elected to run the business.
7. Lack of discipline among the members: Some members show nonchalant attitude towards the
upliftment of the society.
8. Difficulty in recovery of loans: It is very difficult to recover loans granted to members.
 PUBLIC CORPORATIONS
Public Corporations are also called Statutory Corporations or Public Enterprises. They are
large scale business units completely owned and controlled by the government or state to provide
essential services to members of the public and not to make profit but they are financed from tax
payers’ money. Examples are Kanji Dam, Nigerian Television Authority, Lagos State
Television, Lagos State Water Corporation etc. They may be set up by the Federal, State or
Local governments.

SOURCES OF CAPITAL TO THE PUBLIC ENTERPRISES

1. Loans and grants from the government.
2. Loans and overdrafts from financial institutions such as banks.
3. Sales of shares (only from state-owned companies).
4. Credit facilities from suppliers.

REASONS FOR GOVERNMENT OWNERSHIP OF PUBLIC CORPORATIONS/

REASONS WHY GOVERNMENT PARTICIPATES IN BUSINESS ENTERPRISES
1. Capital Involvement: Huge capital outlay is required in setting up large projects which can only
be financed by the government. Examples are Kanji Dam Project in Nigeria, Television stations
and Water supply etc.
2. To create employment opportunities: Government establishes and owns public corporations to
create widespread employment opportunities for her citizens.
3. Rapid economic development: The presence of public corporations attracts both local and
foreign investors which will bring about economic development of the country.
4. To prevent exploitation of consumers: If private enterprises are allowed to render the essential
services, there will be exploitation and discrimination in their provision.
5. To avoid foreign control of the economy: The establishment and management of some
corporations need to be under the direct control of the government of a country to avoid them
from falling into the hands of foreign economic desperadoes
6. To care for the welfare of the public by rendering essential services to their benefit.
7. To generate revenue for the government: Government generates revenue from public
corporations through taxation, dues and fines from the public.

ADVANTAGES OF PUBLIC CORPORATIONS

1. Enough capital is guaranteed: The government can readily make available capital needed for
expansion and supply of infrastructural facilities. Also, government can raise capital for the
corporation through taxation, internal and external borrowing.
2. Public corporation enjoys economies of large scale production: Government can employ
skilled personnel as it can afford to pay them high remuneration.
3. Public enterprises are more consumers conscious: They protect the interest of consumers
from exploitation from private firms.
4. Provision of employment opportunities: They provide employment opportunities to a lot of
people, this helps to achieve rapid economic development.
5. Job Security: Interest of workers is adequately cared for and the employees have a great sense
of job security.
6. Public Corporations enjoy monopolistic powers and are not prone to competitors. Public
utilities like water supply, electricity and transport can be run economically without interference
from competitors.
7. Continuity: There is sure continuity of public corporation since it is being owned and run by the
government.
8. Source of revenue for the government: This is possible through taxes, levies and fines that are
being paid by the people.
 DISADVANTAGES OF PUBLIC/ STATUTORY CORPORATIONS
1. There is gross mismanagement of public corporations accounts: Public corporations funds
are mismanaged and might not be accountable for by the government, some of these funds are
even converted into private pockets of these government officials.
2. Corrupt practices: The corrupt practices of some public servants affect the efficiency of some
corporations.
3. Political interference: This in most cases tends to influence the location of some corporations
and appointment of board of directors which may not be in favour of the public.
4. Delay in decision making: Bureaucratic procedures might cause delay in decision making
process because many people have to be consulted before an important decision can be taken.
5. Embezzlement: There are frequent cases of fraud and embezzlement of government funds.
6. Inefficiency: The little or no threat from business competitors could cause management to be
less effective.

WAYS IN WHICH GOVERNMENT PARTICIPATES IN ECONOMIC ACTIVITIES

1 The government provides economic and social infrastructure such as electricity, water supply,
transport, educational facilities, health facilities, etc. These facilities form one of the
prerequisites for economic development.
2. The government gets involved in joint enterprises or ventures. This means that the government
may set up industrial, agricultural or commercial concerns in partnership with private investors.
In other cases, the government may take over part of an existing business concern by purchasing
shares in the business
3. The government participates directly by establishing wholly government-owned agricultural and
commercial concerns. These include the Commodity Boards, the Water Boards, the various
River Basin Development Authorities, the Nigerian steel Development Authority, etc. Most of
them aim to improve the lot of the citizens.
4. The government establishes financial institutions to provide private entrepreneurs with the
capital they require for development purposes. These include the Nigerian Bank for Commerce
and Industry, the Nigerian Industrial Development Bank
5 The government provides institute training programmes. These involve the organization and
sponsorship of manpower training at institutions of higher learning both at home and abroad.
Middle-level and highly skilled manpower have been developed.
6. The government provides assistance to private enterprises through technical advice in various
areas of economic activity such as industry, agriculture, and commerce. The government also
assists farmers by arranging for the provision of agricultural equipment, fertilizers, and improved
seedlings at subsidized rates.
7. The government guides the conduct of industrial and commercial concerns through the
enactment of appropriate laws. These laws include indigenization decree, price control
regulations, trade union laws, etc. The law if effective will maximize the welfare of citizens and
speed economic development.
 SHARE CAPITAL
A share can be defined as a unit of a company’s capital allocated to an individual. It is the
interest of an individual measured in money terms. Shares can be divided into units of ₦0.50 and
₦1.00 etc. The holder of shares is called a shareholder.

RIGHTS OF SHAREHOLDERS
1. Right to vote at the any meeting.
2. Right to appoint proxy or representative to attend meeting.
3. Right to receive dividend declared by the organization.
4. Right to receive notice of meeting.
5. Right to sell shares.
6. Right to attend meeting.
7. Right to speak at meeting.
8. Right to receive of proceeds of the assets in the event of liquidation.

CLASSES OF SHARES
Shares can be classified into: Ordinary shares and preference shares.
1. ORDINARY SHARES: These are shares that receive dividend after preference shares have been
settled. Ordinary shareholders have the ultimate control over the company’s affairs. They also
bear a bigger proportion of the business risks. Therefore, they expect higher return than
preference shareholders.
TYPES OF ORDINARY SHARES
a. Preferred Ordinary Shares: These ordinary shares are entitled to dividend for an agreed rate of
interest after the preference shares have been settled.
b. Deferred Ordinary Shares: These are shares issued to the founders or promoters of the
company. They receive dividend after all types of shares have been settled.
2. PREFERNCE SHARES: These are shares that are entitled to dividend at a fixed rate before
ordinary shares.
TYPES OF PREFERENCE SHARES
a. CUMULATIVE PREFERENCE SHARES: These are shares that are entitled to payment of
previous accumulated dividend from the profits of subsequent years.
b. NON-CUMULATIVE PREFERENCE SHARES: These shares are not entitled to payment
of previous unpaid dividends from subsequent year’s profit.
c. PARTICIPATING PREFERENCE SHARES: After receiving their normal dividend, these
shareholders can participate in any excess dividend after ordinary shareholders have been
paid.
d. NON-PARTICIPATING PREFERENCE SHARES: These shares cannot participate in any
surplus dividend.
e. REDEEMABLE PREFERENCE SHARES: These are shares that could be brought back by
the company if the need arises, based on laid down terms.

DEBENTURE
This is a certificate issued by a company to an individual, showing that the company is owing the
holder. It is also called certificate or document of indebtedness. It is a mechanism used by a
public company in raising long term loans from members of the public. Their holders are never
part and parcel of the owners of the company like the shareholders but creditors to the company.
They are not entitled to any part of the company’s profit but are paid interest on the money lent
to the company. The interest must be paid before the distribution of dividend takes place.

DIFFERENCES BETWEEN SHARES AND DEBENTURES

1. A person having the debenture is called debenture holder whereas a person having the shares is
called shareholder.
2. Debenture holder is a creditor of the company and cannot take part in the management of the
company while a shareholder is one of the owners of the company. He can take part in the
management of the company.
3. Debenture holders will get interest on debentures and will be paid in all circumstances, whether
there is profit or loss as this will not affect the payment of interest on debentures. Shareholder
will get a portion of the profits called dividend which is dependent on the profits of the company.
4. Shares cannot be converted into debentures whereas debentures can be converted into shares.
5. Debenture holder priority is to get his money back in case of liquidation of a company while
shareholder cannot get his money back if there is liquidation.
6. There are no restrictions on issue of debentures at a discount, whereas shares at discount can be
issued only after observing certain legal formalities.
7. Convertible debentures which can be converted into shares at the option of debenture holder can
be issued whereas shares convertible into debentures cannot be issued.
8. There can be mortgage debentures i.e. assets of the company can be mortgaged in favour of
debenture holders. But there can be no mortgage shares. Assets of the company cannot be
mortgaged in favour of shareholders.
9. Shareholders have a right to vote at general meeting i.e. they have a say in the management of
the business while debenture holders cannot vote at general meetings
10. Shareholders share in the risk of the business while debenture holders do not
 SOME IMPORTANT BUSINESS TERMS
A NATIONALIZATION: This is a deliberate policy by which governments take over the control
and ownership of private enterprises due to economic, political or strategic reasons.

ADVANTAGES OF NATIONALIZATION
1. It ensures steady supply of essential services.
2. It makes it possible for essential services to be rendered not with the motive of making profit but
for the general good of the public.
3. It prevents exploitation and discrimination in the provision of the essential services.
4. It confers monopoly on these companies thereby, removing duplications that could arise if
private enterprises were allowed to provide certain services.
5. More employment opportunities will be provided to the people.

B COMMERCIALIZATION: This is a policy of state owned enterprises to become more

efficient and profit oriented. The policy makes it possible for public enterprises to become more
viable and effective.

C JOINT VENTURES/ENTERPRISES: They are those businesses in which private investors

and governments are in partnerships.

REASONS FOR SETTING UP JOINT ENTERPRISES OR VENTURES

1. To combine some of the advantages of government and private ownership and reduce the
problems of complete government ownership or private ownership.
2. To enable government monitor the activities of the business. For example, government has large
shares in businesses such as cement production, car assembly, commercial banking, insurance
companies, mineral production, etc

D INDIGENIZATION: It is the process through the use of law in which indigenes of a country
are made to participate actively or take control in the commercial, industrial and other sectors of
the economy.

REASONS FOR INDIGENIZATION

1. To ensure economic stability in the country.
2. To encourage local retention of profits made.
3. To promote and encourage the participation of the indigenes in the economic activities of their
country.
4. To reduce the country’s dependency on foreigners.
5. To improve the income and standard of living of the people.
6. To create employment opportunities to the indigenes.
7. To raise the level of manufacturing goods in the country.
8. To promote industrialization through the use of indigenes and indigenous means.

E PRIVATIZATION: This is a policy designed to enable individuals and private corporate

organizations take over the ownership and control of government business such as public
companies and corporations.

REASONS/ADVANTAGES/ BENEFITS/ MERITS OF PRIVATIZATION

1. It saves the government the funds usually budgeted as subsidies to such businesses thereby
reducing government’s expenditure and increases government’s revenue.
2. The government gets a lump-sum revenue from the privatization for other essential services
3. It helps in the development of private sector businesses because individuals are encouraged to
participate in business.
4. It encourages foreign investment as some buyers of privatized enterprises are foreigners
5. It encourages the training of entrepreneurs and the acquisition of skills and technical know-how
6. It removes government monopolies in business because it gives consumers wide range of choice
due to the existence of competition.
7. It promotes efficiency in production due to change of ownership
8. It brings better attitude to work by the employees.
9. It leads to diversification of the economy.
10. It develops a good and efficient management for the privatized enterprises.

WEAKNESSES/FAILURES/DISADVANTAGES /DEMERTS OF PRIVATIZATION

1. It leads to unemployment: The defect of the system is that some of the workers are declared
surplus; therefore, there is tendency that they will be laid off.
2. No branches in rural areas: The private owners do not like to set up branches in rural areas.
This happens majorly in private banking sector, the banking facilities remain confined in urban
areas.
3. Unbalanced growth: Privatized organizations such as banks provide credit in specific areas and
to specific people. As a result, there is unbalanced growth in the country especially rural areas
may remain underdeveloped.
4. Competition from other firms: There would be competition in private organizations because
most private owners would go for businesses which yield a lot of profit, and in most cases they
go for the same business making competition stiff.
5. It leads to arbitrary increase in the market prices of goods and services of the privatized
enterprises as against the formerly subsidized prices.
6. It makes government in power to be unpopular.

WAYS OF FINANCING BUSINESS ORGANIZATION

1. Sale of Shares: Shares are sold to the public and the proceeds become part of the company’s
capital.
2. Debenture: This is a long term loan raised from the public with a fixed interest rate.
3. Trade Credit: This is a situation where by the wholesaler acts as a financier to a company. In
this situation, the wholesaler pays in advance to the company.
4. Bill of Exchange: A document duly signed by the debtor’s bank given to the creditor and the
creditor cashes the money with some discounts.
5. Hire Purchase: This is the facility granted to a firm to buy and pay in installment.
6. Bank loan and overdraft from financial institutions.
7. Equipment Leasing: Firms lease out some of their equipment for money.
8. Ploughed back profit: Re-investing part of profits made or realized from already existing
business.
9. Borrowing: This can be from either relations or friends or both.
10. Personal Financial Resources: These include personal savings and contributions by groups that
form the business.
11. Inherited Capital: This is the capital left behind by a dead person and used by another in
establishing and running a business.
12. Government Grants: This is the financial assistance given by the government to business
organizations especially cooperative societies and public corporations.

GENERAL PROBLEMS FACING BUSINESS ORGANIZATIONS

1. Inadequate capital: Most of the business organizations in Africa face the problem of shortage
of capital. This is due to low national income and low per capita income which discourages
savings.
2. Inadequate infrastructure: Infrastructure such as good roads, railways, electricity, water
supplies etc are needed by business organizations for effective functioning. In most cases, these
infrastructural facilities are not available.
3. Political instability: Meaningful business facilities do not take place in a rowdy political
atmosphere that is full of coups and counter-coups which is being experienced in Africa.
4. Shortage of raw materials: Most of the business organizations in Africa find it difficult to
acquire the necessary raw materials. Majority of these raw materials are from the developed
 nations. In Nigeria for instance, the exchange rates have become so expensive and it now costs
more to get these raw materials from the developed nations.
5. Shortage of highly skilled personnel: The necessary highly skilled personnel needed by these
business organizations are always in short supply. This does not augur well for the progress of
business organizations.
6 Problem of management.
7 Adverse government policies.
8 Problem of embezzlement and corruption.
9 Low level of technology.
10 Absence of large market.