A business organisation as compared to any public service or charitable Organisation is aimed at producing goods and/or rendering services to the public, with the sole aim of making profit. However, business venture can be owned in the following ways: (a) buying an existing business, inheriting an existing one, and launching a new business.
Buying an existing business possesses some potential advantages to the owner. Firstly, the records of the business will reveal whether it has granted reward to the former owner for his or her efforts. Its profit potential can be ascertained more correctly than a business, that is to be started from the beginning. The buyer will be able to know if the expected income will be satisfactory to him. Secondly, a major uncertainty is eliminated by the existence of established customers. There are no registration costs to be borne and also already established connections have been made with suppliers, customers, banker’s etc,
A business that is however bought at a wrong time, place of location and incorrect pricing maybe of great loss to the purchaser. It is however, important to seek the advise of estate/equipment valuers, bankers, trade suppliers, and customers of the business, so as to gain more knowledge and a reliable appraisal of the business.
Inheriting a business is similar to purchasing an existing business. The difference however, lies in the fact that the heir does not pay a price for the business. The advantage is that the heir to the business can establish the business value by an independent audit if he has not participated in its management.
Launching a new business carries greater risks compared with buying or inheriting an existing business. Despite these risks, when adequate preparations are made and the Owner is resourceful, capable, and dynamic, a new business could prosper and grow into a multinational company. This is made possible when the owner selects and places competent workers, locates the baseness appropriately, produces suitable products and renders good services to her customers, acquires suitable merchandise, equipment, supplier, etc. These however, will enable him in the short and long run to attract customers who patronises the business product(s) or service(s).
Forms of Business Ownership
Business organisations can be established and operated under various forms of ownership. In the Nigerian business environment, these are the following forms of business in operation.
(a) Sole proprietor
(c) Corporation (Public and Private)
(d) Cooperative society
A Sole Proprietorship is a business that is owned by one person and run for his or her personal profit. It is the most common type of business ownership in Nigeria, He/she is called the proprietor, but if a name other than the surname of the proprietor is to be used it has to be registered
with the registrar of business names. According to the registration issued by the registrar of business names which only confers on the proprietor the right to be the sole user of the said business name, it does not confer any other special light and privilege on any license to carry on the business itself. Any licences needed to operate a beer parlour must be obtained by the sole proprietor whether or not the name is registered.
A high percentage of business classified as small businesses are made up of sole proprietorships These businesses include trading and other retail establishments, eating and drinking places, hotel, transport concerns, petty contracting, poultry farming, and light manufacturing fabrication
Advantage of Sole Proprietorship
he advantages of sole proprietorship include the following:
1.lt is easiest form of ownership to establish.
2. The owner of the business has total authority over the business.
3. Profits made in the business belong solely to the proprietor.
4. There are no special legal restrictions apart form laws applying to all forms of business ownership. Any licenses required must, of course be obtained in order to operate the business.
Disadvantages of Sole Proprietorship
The disadvantage of sole proprietorship includes the following:-
1.Limited Capital: The amount of capital available is limited to the assets and credit of the sole owner
2. The owner has unlimited liability: The owner is liable to cases öf bankruptcy or legal judgments, not only for the amount he has invested in the business, but also for all other assets he owns. Those other assets may be taken from him to settle claims on his business.
3. Limited life of the business: The owner may decided to cease operations or he may die; the business then legally ceases to exist in practice however, it may be possible to make adequate arrangements to continue the business on the death of the original owner, though the name has to be registered under the name of the new propietor.
4. Managerial Limitation: Proprietors tend to lack management skills and the problem created in this deficiency adversely affect the business, since he makes all decisions as regards the day-to-day running of the business in respect to finance, personnel, production, and marketing in the business
Section one of the British Partnership Acts, 1890 defines a partnership as the relation which exists between persons carrying on a business in common with a view of making profit. Two or more persons may join in a partnership but by the British companies Act of 1048, specifies that, the number may not exceed twenty, or ten if engaged in the business of banking. A partnership is attractive to small businessmen who wish to pool their resources and it is also popular with professional people such as lawyers, doctors, accountants, architects, business
consultants and engineers A partnership may be registered with the Registrar of Business names as is the case with sole proprietorships.
Types of Partnership
Partners are classified according to the extent of their liability in the business and their degree of participation in running the business. A general partnership business is one who has full powers of participation in the conduct of the partnership business, and who has unlimited liability (ie, to the extent of his estate) for the partnership debts General
partners may be further sub-classified into dormant or sleeping partners who take no part in running the business but have unlimited liability. A senior partner is a general partner who owns a large share of the business. A junior partner owns a small share of the business or has probably been newly admitted to the partnership.
A limited partner is one who has contributed a certain sum of the partnership, but does not normally take any part in the management of the business. The limited partner is liable for the debts of the partnership only up to the amount he has agreed to contribute to the partnership assets, limited partnerships are guide by the British limited partnership act, 1907.
A partnership Agreement, alternatively called articles of partnership or Deed of partnership’, is a written contractual document building all Members of the partnership and spelling out all aspects of operation of the partnership. It should ideally be drawn up by a lawyer. Points covered by the partnership agreement include the following
(1) Name of the firm and effective date of the partnership
(2) Names and addresses of the partners.
(3) Location, nature and scope of the business activity for the business, activity of the partnership.
(4) Rights and duties of each partner.
(5) Amount of each partner’s initial contribution to the capital of the firm.
(6) The distribution of profit and loss.
(7) Withdrawals and salaries (if any) of partners.
(8) Authority relationship of the partners.
(9) Partners’ access to books and records of the partnership.
(10) Procedure for admitting new partners.
(11) Terms and method of withdrawal of any partner from the association.
(12) Distribution of assets and name of business if dissolved.
(13) Provision for arbitration of disputes.
Advantages of Partnership
The main advantage of partnership are as follows:
(1) It is easy to create
(2) Division of profit may be done in any manner, e.g. in proportion to funds contributed or time spent in running the business.
(3) More capital can be raised on a partnership than a sole proprietorship.
(4) It allows people of widely different skills and talents of work to work together for greater mutual gain.
(5) Usually legal restrictions are no more stringent than those existing for sole proprietorship.
Disadvantages of Partnership
The main drawbacks of partnership include the following:
(1) The great likelihood of conflicts of authority inspite of provisions in the partnership agreement to define areas of authority of the partners.
(2) General partners contribute a limited life to the partnership, the withdrawals or death of any of them terminates the partnership.
(3) The unlimited liability of the general partners can the be a serious disadvantage just as in sole proprietorship.
An unusual form of business association is the co-operative society It can be viewed as an expanded general partnership in which the number of members is unlimited, each member holds one share in the society and thus has equal voice in the management of the affairs of the society. It is rare to find a co-operative society in Nigeria that is purely a consumer co-operative which purchases items in bulk for distribution to members, most co-operatives are multi-purpose in nature and may engage in retailing of goods to the general public, production of crops, poultry farming, fishing or other small business.
This form of business association is strongly encouraged by both federal and state governments in Nigeria in order to undertake viable economic activities. The state ministries of trade and co-operatives register new co-operative societies and provide them with assistance in organisation and management of their affairs. Loan financing, provision of capital equipment, and other inputs at subsidized prices are some of the other forms of assistance provided for co-operatives societies. Unfortunately today, lack of commitment and involvement from members to the objectives of their societies has made some of them not to realize their goal(s) as business entities.