What are Forms of Business Ownership and Orientation
Before aligning your goal to your business, it is important to select a business type. So, by studying those business's pros and cons you can easily make decisions.
Classifying Business
- Private Business
- Public Business
This means the transfer of public sector resources to the private sector. In here, improving efficiency.
Public Sector Organisation
Advantages
- Managed with social objectives rather than simply with profit objectives.
- Loss-making services might still be kept operating if the social benefit is great enough.
- Financed raised mainly from government.
Disadvantages
- Trend toward inefficiency due to lack of strict profit targets.
- Subsidies from government can also boost inefficiencies.
- Government may interfere in business decisions or political reasons.
Advantages
- Easy to set up. Therefore, No need to legal formalities.
- Owner has complete control. As their wish can manage.
- Owners keeps all profits. Because he/she is an owner of this business.
- Able to choose times and patterns of working. If he/she want to develop further, can work hard without bothering about working hours.
- Able to establish close personal relationships with staff. Because he/she directly contact with their workers.
- Basically, it is based on the interest or skills of the owner.
Disadvantages
- Unlimited Liabilities
- Difficult to raise additional capital.
- Lack of survival
- Often faces intense competition from bigger firms.
Partnership
Advantages
- Shared decision making. So they can take good decisions.
- Partners may specialise in different areas in business field. For example : Marketing
- Business losses shared between the partners.
- No legal formalities. So time Saving.
- Additional capital injected by each partners.
Disadvantages
- Unlimited liabilities for all partners.
- Profit are shared among partners.
- All partners are bound by the decisions of any one of them – Collective decision making
- Not possible to raise capital from selling shares
- A sole trader, taking on partners will lose independence on decision making. When they have higher number of members it will lead to decision making diiculties.
Limited Companies
Private Limited Companies
Advantages
- Shareholders have limited liability.
- Consider as a separate leal personality.
- Share holders did not involve to the management.
- Original owner is still often able to retain control.
- Able to raise capital by selling shares to family, friends and employees.
- Have large number of share holders.
Disadvantages
- Legal formalities involved in establishing the business – time consuming is hard
- Capital can not raise by selling shares to general public.
- it is difficult for shareholders to sell shares.
- End of the year accounts must be submit to the company registrar.
Public Limited Companies
Advantages
- Shareholders have limited liabilities – So shareholders are general public.
- durability is high
- Have separate personal identity.
- Buying and selling shares are easy. So transferability off shares are high in here. Also it’s easier to deal with situations like a shareholder’s dearth.
Disadvantages
- Legal formalities involved in establishing the business. So it consume additional time and effort.
- Cost of business consultants and financial advisors when creating such a company.
- Share pricers subject to variations. For example : State of the economy.
- Legal requirements concerning disclosure of the information to share holders and general public. For example: annual report
- Ownership and control issue – Shareholders are normally known to the directors or founders. So it is difficult to control who is a shareholder and who is the directors of the company. Also they face dispute and spend much time to manage shareholders expectations.
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