Analysis of Business Function - Assignment Example

BUSINESS FUNCTIONS By Location Business functions i. Types of businesses Businesses are structured in a variety of different sizes and shapes. The following is a description of the different types of businesses: Sole proprietor-The typical sole proprietor traders include types of occupations such as that of an electrician or a plumber. However, sole proprietor is a term applied to individuals who operate small businesses or even wed-based businesses at their homes. Sole proprietorship is the most common and simplest form of business. The owner of the business is responsible for all activities carried out in the business. For instance, the sole proprietor enjoys all profit alone and suffers all loses alone. He or she trades under his or her own name, without separation of liabilities and assets (Cross 2009, p. 23). This means that, the sole proprietor is personally held liable for all debts incurred. Partnership- These are the types of businesses that are typically found in higher professional services like lawyers, dentists, accountants, whereby the partners come together to share their skills and expertise. The partners are also able to share many things such as organization of work rotas and workloads in order to allow for holidays and time offs. Partnerships are formed by two or more individuals who share any business oriented activity, including profits, losses, and business related decisions. In addition, all partners are equally as well as personally for all debts (Cross 2009, p. 23). Any formal term concerning the partnership is usually written down in a partnership agreement document. Company-Companies are types of businesses whose owners are shareholders. The shareholders contribute some amount of money to the central pool. The shareholders then add this capital by use of other types of finance or borrowing. Directors operate the businesses on behalf of the other shareholders. All shareholders get a portion of the company’s profit. Unlike in partnership where partners get equal shares in company, each shareholder gets profit portion that is equivalent to their contribution. This type of business is viewed as an entity that is legally separate from its shareholders. Franchise- Franchises are licensing agreements whereby a group or an individual buys the trading and production rights under a brand name that is well known which is under a given locality. A franchise involves the group or the individual to use another company’s name and business model to establish own business (Cross 2009, p. 26). The owners of the franchise business benefits from operating their business under the privilege and reputation of another larger company. Limited liability- Limited liabilities benefits professional partners such as doctors and lawyers. The main aim of limited liabilities to offer protection to shareholders of companies and limited partners. According to the laws of limited liabilities, the maximum sum of money that a partner or a shareholder can lose is the sum that he or she invested in the business. This type of business allows its members to regulate their individual liabilities if the business faces some challenges. Other types of businesses include; corporation, nonprofit corporation, trust, joint venture, Massachusetts trust, tenants in common, association, and municipality. ii. Types of business ownership One of the initial decision that a business owner should make is determining the type of business ownership that suits your business. There are four common forms of business ownerships, which are discussed below. Sole proprietorship- This is a type of business ownership whereby only one individual owns and operates the business alone. A good example of a sole proprietor ownership is a shop owner. This type of business ownership has various advantages such as enjoying all profits alone and there is no much advertisement cost incurred (the owner simply announces that he is in business and look for license and permits. The owner makes all decisions alone, including termination of the business. The main disadvantage of this type of ownership is that, the proprietor suffers all debts alone, meaning that he can lose everything in case of business failure. Partnership- This type of ownership involves two or more individuals. There are two main forms of partnership ownerships; limited and general. In a general type of partnership, all partners enjoy unlimited liability, but in a limited partnership, there is at least one individual who has limited liability and another one with full liability. In most countries, a legal document known as “Articles of partnership” is required. This document contains details of investments of all partners (Cross 2009, p. 45). The main advantage of this type of ownership is that, each partners is responsible for all business actions and outcomes. The ownership of a partner ends when he or she dies or withdraws from the business. A good example of partnership is that exists between banks of German and its businesses. Private Corporation-In this form of ownership, the liabilities and assets of the business are separate from the owners. Although there are public corporations whose activities are carried out through a public stock exchange, most of small business operates under private corporations. These types of businesses are owned by view individuals who typically play the role of managing the business. Formation of a private corporation requires development of a legal document known as “Articles of Incorporation”. The owners then submit this document to state where the business will reside (Cross 2009, p. 37). The owners have limited liability whereby owners can only lose the amount that is equivalent to their investments. This type of ownership, also has an unlimited lifespan since the business can last forever. It is also easy to transfer ownership from one individual to another. Limited Liability Company- This is a form of business ownership that is drastically growing in many countries. This type of owners offers limited liability and the number of members determines the type of tax given to the business; i.e. the business can be taxed as either sole proprietorship or partnership. This form of business requires submission of a legal document known as “Articles of Organization) to the country where the business resides. This form of business is rapidly growing in many countries because of its flexibility, ease to operate, and involves minimal corporation paperwork. In addition, profits in this type of ownership are not divided according to the relative interest of the owner. iii. Factors to consider when starting a business The world of business is one that has many uncertainties. Some businesses, even if they are well-planned end up failing and other succeeding. Business ventures should not only use their ideas or talents, but consider the following factors before starting up their business. Such preparation helps the business owner save money, time, and frustration that results from failed businesses (Lichtkoppler 2003, p. 13). The market- Market is the customers that one will sell his or her products. In other words, market means the target population. Before an entrepreneur starts up a business. He or she should first determine whether there is enough market for the business to be successful. For instance, if your business involves selling of ice creams, your target market or population will be children (Lichtkoppler 2003, p. 16). If you want to start up a shop, it will be wise to locate it near residential areas and not town centers. Demand- Demand is incomplete unless customers buy, consume or use them. Therefore, before an individual starts up a business, he or she must consider whether the available customers are able to buy the goods or services. If start a business and customers fail to buy or use the goods or services, then they become ineffective or useless. Before starting a business, it is wise to consider the number of customers who require the goods or services you intent to produce or sell (Lichtkoppler 2003, p. 19). Demand of a product depends on the price, packaging, the quality of the product or services and customer’s income. These will also be part of factors a business owner must consider when evaluating demand. Location- Location means the place you will stay to sell your products or services. The business location is a very important aspect to put into consideration. Making the assumption that the demand and market of the goods are known, a business owner should ensure that he locates the business in a convenient place where the customers will have easy access to the goods and services (Lichtkoppler 2003, p. 17). While making the choice of location, an entrepreneur should consider customer’s comfort, that is, target population. Taking the example of selling ice creams, the convenient location will be near a school. Raw materials and transportation- If the business will be a manufacturing business or services that requires inputs, it is good to consider the things needed to produce the goods. Determine whether the raw materials are easily obtained or available. If it is difficult to obtain the required raw materials, it is recommended not to start such business. Transportation is also another factor to consider before starting a new venture. This involves considering things like cost of transportation of raw materials or goods to where they are needed (where they to be sold). It is also important make consideration of the transported goods and their durability. For instance, transportation of perishable products like tomatoes need serious consideration because they can get damaged during transportation. Bibliography Cross, MC 2009,Types of business enterprise, structure and control, New York: Prentice-Hall. Lichtkoppler, FR 2003,Factors to consider in establishing a successful aquaculture business in the North Central Region, North Central Regional Aquaculture Center. Read More