Handbook for Modern Business Practice - Term Paper Example

Business Function Business has been an integral aspect of growth and development since the advent of civilisation. Business is source of income and a facilitator of better relations between individuals, organisations, and countries. In fact, there are some parts of the world in which business is the only denominator among hostile entities; the glue that binds different factions. The will discuss the various business types in existence, the three different types of business ownerships and the factors that need to consider when starting a business. Types of Businesses Business types are divided into two groups: incorporated and unincorporated companies. In the second category, the enterprise is not registered with the relevant authority as a business. It comprises two types of ventures: Sole Trader This is the oldest, most common, and most basic business type. As the name suggests, this type of enterprise is owned and managed by one person, who is in charge of all operations conducted on behalf of the business. Since it is the easiest to start, it manifests in form of small retailers and utilities like beauty services, photographers, repairs and maintenance, transport, cleaning, etc (Akdeniz, 2013:16). This type of business is inexpensive to start and, as a result, is often supported by the founder’s savings until growth necessitates external funding. Partnership In its simplest form, a partnership resembles a sole trader, with the only difference occurring in the sharing of ownership (Gevurtz, 2014:21). All partnerships should have partnership agreements that explain the rights and responsibilities of the various partners involved. In light of this, there are different types of partners, who are all covered by the partnership agreement. For example, there may be dormant, “sleeping,” or quasi partners, who own a share of the enterprise but are not actively involved in its management (Cornell, 2013:36). Partnerships have unlimited liability, and are common in careers like accountancy, dentistry, medical practice, law, etc. Starting in 2001, there has been a new type of partnership known as a limited liability partnership. This is like a hybrid of a partnership and a limited company, since it has limited liability (like all limited companies) but must be owned by not less than two members (making it a partnership). Limited liability partnerships, also known as LLPs, are formed to aid professional partnerships among doctors, dentists, lawyers, accountants, and others, who are barred from forming limited companies because of constraints imposed by their professional associations (Pride & Hughes, 2014:23). LLPs work just like limited partnerships, allowing partners to limit their individual liability if the venture runs into challenges. Having discussed unincorporated firms, I proceed to incorporated firms, which comprise private and public limited companies. Unlike unincorporated firms, incorporated firms are registered with the relevant bodies in their respective countries. Private Limited Company (LTD) A private limited company has limited liability. Compared to a sole trader, which enjoys unlimited liability, a private limited company restricts liability to the value of stock issued. This implies that any debts accrued by the venture are the company’s and not the shareholders’. In a sole trader, all debts and liabilities are the responsibility of the owner. A private company must be registered with the appropriate body and have several legal letters, such as the Articles and Memorandum of Association (Pride & Hughes, 2014:31). A private company can only have one director, and it must keep annual accounts and share them with the relevant regulatory agencies. Private companies exhibit a great deal of variation in terms of size. For example, they may range from small, family-owned outfits to large, multinational ventures. Shares in a private company cannot trade on the stock market because unlike a public company, the shares are not available to be bought by members of the public. Each shareholder invests money in the company and receives stock equivalent to the amount of capital they have injected into the business (Pride & Hughes, 2014:34). Since it is distinct from the owners, a private company can be sued, held liable for its staff’s actions, record a profit or a loss, and be liquidated. Public Limited Company (PLC) A PLC is similar to a private company in that it has shares. However, that is where the commonality ends, because unlike a private company, a PLC’s shares are available for the public to trade as determined by regulations. Consequently, ownership is free for anyone who intends to buy stock. PLCs also have legal conditions that require them to submit annual accounts and reports to regulatory bodies (Gevurtz, 2014:32). Some requirements include having not less than two directors, having a trading certificate, and having a competent company secretary. PLCs are much more complex compared to other business types, and that is why they are mostly large enterprises. Although it is easier to accumulate capital using PLCs, their accounts must be available to the public. They must also be audited, avail specific information to Companies House, and can be acquired by other stockholders. Franchises This type of company pays to use another successful company’s brand and business model to create its own enterprise. They are common in the fast-food and fashion industries, where brands and business models are crucial to success. A franchise pays royalties and fees for any advice and indoctrination received from the franchisor and it is governed by particular and complex laws. Cooperatives (Workers and Consumer) This type of business is designed to meet the common needs of employees and consumers. All members are equal, all decisions are made unanimously, and any profits are distributed fairly or reinvested in the business (Boyer, 2014:25). These ventures operate using seven principles: free and voluntary membership, concern for community, democratic structures, collaboration among them; economic involvement of members, autonomy, education, information and training. Business Ownerships Sole Proprietorship A sole proprietorship is a business that is owned by one person. The owner bears all liabilities and is not separated from the business, meaning that he is responsible for everything that happens to the business, such as profit and loss, lawsuits, and bankruptcy (Pride & Hughes, 2014:48). In addition, all the assets belong to owner, and all decisions are made by the owner for his benefit. Although a sole proprietorship is easier to run compared to other businesses, the all-or-nothing approach it brings is too risky. Partnership A partnership is a type of business that belongs to two or more individuals. There are three common types of partnerships: limited liability partnerships, general partnerships, and limited partnerships. The latter two are the most prevalent types. Partnerships have their own advantages and disadvantages compared to other business types, so it is upon individuals to decide if it is ideal for them. Corporations (Private Companies and PLCs) Corporations can be either state or privately-owned, and can be formed to be profit or not-for-profit. In both public and private companies, shareholders are in charge of managing the business (Graham, 2013:41). However, in private companies the shareholders cannot be members of the public. In a PLC, the public has a say in the running of the company and can even acquire it from the founders. Cooperative Cooperatives are often limited liability companies (LLCs) whose business model can be profitable or not-for-profit. Cooperatives are different from companies because they have members – not stockholders – and decision making is shared. Cooperatives can represent employees or consumers. Factors to Consider when Starting a Business Before starting any business there are several factors that an entrepreneur must take into account in order to improve the venture’s chance of success. The most important include the following: Product In this context, the product is a general term for the item or utility that the entrepreneur is offering to consumers. The product must have certain attributes that make it, in the entrepreneur’s view, worth spending money on (e.g., relevance, innovation, and affordability). The product must also make business sense, meaning the entrepreneur should profit by selling it, if not immediately then in future. Market Assuming that the product is there, the entrepreneur must identify who intends to sell it to and what are the characteristics of the prospective buyers (Gevurtz, 2014:18). This dimension involves understanding the different dynamics that define the market, the customers, the competition, regulation, future outlook, etc. A good grasp of the market determines the success of the product and the business. Price Price depends on many factors, such as the customers, features of the industry, and the production costs. However, the entrepreneur must always set a price that represents the best option for the business and consumers (Graham, 2013:19). The price should not be too high or too low; it should be logical for all parties. The price must also be flexible to accommodate changes in the market. Factors of Production (Land, Labor, Capital) Each business features at least two factors of production. These factors are extremely crucial to the starting, survival, and growth of any business, and must be obtained before the business can take off. Raw Materials Depending on the type of business, raw materials may be required. Whatever elements that must be processed or converted to create the final product are critical to the start and success of a business. Raw materials must be cost-effective to acquire. Location This also depends on the type of business, but it is a defining factor in cases where it affects the success of the business (Graham, 2013:56) Location determines a lot of things, so the entrepreneur should consider how important it is and how it can be managed to create the best conditions for the business. Location can affect market access, market share, visibility, and production costs. References Akdeniz, C. (2013) MBA 2.0: handbook for modern business practice, New York, Booktango. Boyer, A. (2014) Business model generation: a handbook for visionaries, game changers, and challe, London, CreateSpace Independent Publishing Platform. Cornell, W. (2013) Modern business: business organization, New York, Literary Licensing. Gevurtz, F. (2014) Business planning, St Paul, Foundation Press. Graham, A. (2013) Planning your business success: easy business plans! London, Moses Akinmuyiwa. Pride, W. & Hughes, R. (2014) Business (12th ed.), Mason, Ohio, South-Western Cengage Learning. 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