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THE ENTREPRENEURSHIP MEETING POINT

 
 
 

Forms of Business Units

ArticleID 233  
Writer Isaac Thuku
Category Personal Article
This refers to the various ways in which a business may exist.

Sole proprietorship

A sole proprietorship is a business enterprise that is owned by one person.One can get the capital to start by borrowing from friends,banks and other money lending institutions, credit buying, inheritance and renting out property. In a sole proprietorship, a trader is accountable to him or herself. Furthermore, the business is flexible and the trader is able to maintain top secrets of a business. However, lack of consultation may lead to poor decision making. If the sole trader gets sick, the business may lack adequate management since in this type of business a trader may get assistance from his or her family members.

Partnership

Partnerships are owned by more than one person. Partnerships may be temporary or permanent. Temporary partnerships are formed to carry out a specific task for a specific time after which the business dissolves on completion of the task. You will require a partnership deed which is a written agreement by all the partners. Note that the deed should contain the name of the partnership, address of the head office, profit and loss sharing ratio, the capital to be contributed by each partner and the rate of interest on capital. In addition to that, a partnership makes more profit than a sole proprietorship; different talents are combined so that each partner is assigned a task which he or she can perform best. Consultation leads to good decision making. However, a mistake made by one partner may lead to losses which are shared by all partners.

Co-operative

When a group of people come together with an aim of providing convenient services to its members, they form a co-operative. Co-operatives have voluntary and open membership and it also provides dividends to its members. There are various types of co-operatives I.e. producer co-op, consumer co-op, savings and credit co-operative societies (SACCOs) and primary co-operatives. Among the advantages is that they are run on a democratic basis, their loans carry interests at small rates, all members have equal chances of being elected to the managerial committee and also members have a limited liability. In Saccos a loan maybe written off in case of death of the applicant. Co-operatives may suffer from political interference, corruption and embezzlement of funds is common.

Limited Liability Company (LLC)

LLC includes public and private companies. Their differences were already highlighted in this website. Check in the questions section. A company is an association of people who contribute capital in order to carry out a business together with a view of making profit. Limited liability companies have a lot of advantages and may be dissolved in case of insolvency (bankruptcy), ultravires (when a company acts contrary to the objectives listed during formation), amalgamation (when two or more companies join together to form one company and a court order to dissolve.

Public corporations

These are organizations formed and controlled by the government. The initial capital is readily available from the government, it can afford to offer goods and services at low prices, some are monopolies hence they get superb profits.

Parastatal

Parastatals are almost similar to public corporations only that they are fully owned by the government. It is managed by board of directors appointed by the government. Their advantages and disadvantages are similar to those of public co-operations.

Finally, note that there are emerging trends in forms of business units like privatization, amalgamation, formation of cartels and many others.
Forms of Business Units, sole proprietorship, partnership, LLC, Limited Liability company, ccoperative, sacco, parastatal, public corporation
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