Identify
5 different business that does NOT require registration and 3 that require
registration. Discuss them to show why some should be registered and why some
should not be registered.
THE IDENTIFY FIVE DIFFERENT BUSINESSES
THAT DOES REQUIRE REGISTRATION
THE SOLE PROPRIETORSHIP:
This
is sometimes referred to as the solve trader. Sole proprietorship is the type
of business organization undertaken by a single person.
Function: the sale proprietor organized the business. He takes
decisions about the location of the business the types of business to undertake
how to procure capital for the business and above all, he bears all the risks
involved in the business and therefore he could be regarded as the
entrepreneur.
ADVANTAGES OF A SOLE PROPRIETORSHIP
1. The sole proprietor takes on-the spot decision when
necessary about his business. He does not wait for authority from any quarter before
he could take any necessary action in the running of his business.
2. The sole proprietor is not bound to follow any
established procedure of business operation rather his is free to introduce
radical changes that can earn him economics advantage
3. Due to the small number of his employees. He is close
to them and is able to know their problem with the result that he usually gives
the help where possible. This increases the interest of workers in their job
resulting in increase in productivity.
4. The sole proprietor has tax advantages. He does not
pay tax on his business, rather, the tax he pays is limited to his personal
income tax. Since his incomes is not known to the public, he can understate his
income with the result that the amount he pays in tax may be small.
5. the sole proprietor enjoys privacy in his business.
The account of his business is not usually exposed to the public if he likes,
he keeps record of his business, if he doesn’t he may not keep it. Nobody has
the right to question him about this.
DISADVANTAGES OF A SOLE PROPRIETOR
1. He bears all the risks about his business.
2. He may not have enough capital necessary for the
expansion of his business. Besides, the possibility of raising capital from
other sources is limited.
3. the business does not enjoy the advantages of limited
liability.
4. Since the business operates on a small scale, it does
not enjoy the advantages of large scale production.
5. The continuity of the business may be hampered as a
result of the death of the owner of the business.
THE CO-OPERATIVE SOCIETY:
The
co-operative society is a form of business association. It is usually formed by
either the producers, consumers or financiers for the benefit of members of the
association. Types of co-operative society: there are many types of
co-operative society in Nigeria and other West African counties, the best known
types are the consumer’s co-operative society. A consumer’s co-operative
society is a business association of consumers who pull their resources
together to purchase consumer goods on whole sole basis which they store in
their co-operative stores for resale to members and non-members at the
prevailing retail prices.
There are two main forms of consumer
co-operative societies which are:
1. consumer co-operative wholesale associations
2. Consumer co-operative retail associations.
PRODUCER’S CO-OPERATIVE SOCIETY:
A producer’s
co-operative society is an association of producers. These producers decided to
come together in the producer’s co-operative society to pull their resources
together for the purpose of large scale production.
This
is most common in agricultural activities where farmers come together in the
form of co-operative societies for larger scale agricultural production. Some
producer’s co-operative societies engage in actual large scale production of
agriculture products while others are engaged in the marketing of these
products. Experience has shown that members of these co-operative ventures gain
a lot both financially and maternally from the operations of their societies.
CREDIT AND THRIFT CO-OPERATIVES:
This
is the types of co-operative societies formed by low income earners who find it
difficult to save. The aim of this society is to make it possible for this
group of workers to save for the rating day through this society. From the
contributions of members, loans are given to needy members who request for such
loans. Such loans are usually given to members at a very low rate of interest.
ADVANTAGES OF CO-OPERATIVE SOCIETIES:
There
are many advantages which members of a co-operative society derive from being
members of such a society. Such advantages include:
1.
Members of a
co-operative society have their common interests to protect. Therefore they
work hard to make the society very profitable since they know that the profit
belongs to them alone.
2.
members are
encouraged to make purchases from the co-operative store since they know that
the amount of the share of the profit of the business which they will get
depends on the amount of purchases made from the co-operative.
3.
The society is
run along democratic lines. Each members has one vote. He can vote or be voted
for. This gives each member a sense of belonging.
4.
The society does
not incur heavy expenditures of advertising as members buy from the
co-operative store. They more often than not persuade the friends and relations
to buy from the store.
5.
In most cases
there is free entry and free exit into and out of the society depending on the
rules and regulations governing the society?
DISADVANTAGES OF CO-OPERATIVE SOCIETIES:
1. Sometimes, members of the society who are elected to
manage the affairs of the society may not have the necessary managerial skill
required for efficient management of the society business. This may lead to
losses from the business operatives of the society. This sometimes makes it impossible
or the society business operations to yield profit.
2. Since membership of a co-operative society is not
restricted, people of questionable character may join the business. Their
membership of the society may lead to the downfall of the society.
THE JOINT STOCK COMPANY:
A
joint stock company may be defined as a unified association of individuals for
achieving a particular objective, in most cases for carrying on business
activities. It is usually made up of shareholders who invest their money in the
business. They bear the risks involved in the business the business is handled
by officers who receive salaries. They are usually supervised by the board of directors
elected by the shareholders of the company. A limited liability company is a
legal person quite different from its owners. It can take legal action against
person or other legal entities. Also legal actions could be taken against it.
TYPES OF COMPANIES
There
are two types of companies. They are the following: the private company: This
type of company has membership of two to fifty its shares cannot be offered to
the general public. Also the shares of this company are not transferable unless
with the full knowledge and support of other member. If the company happens to
be owned by five or fewer peoples, it is called a close company.
The
public company: the public company is owned by at least seven persons. Its
shares are usually sold or bought in the stock exchange, it there is a
quotation for the company’s shares. It is expected that the balance sheet of
the company should be sent to the registrar of company every year for necessary
inspection.
ADVANTAGES OF JOINT STOCK COMPANY:
1. The company is a limited liability company the
shareholders of the company enjoy the advantages of limited liability. This is
the restriction of an owner loss in a business to the amounts of capital
invested in it. For example, if Mr. A. invested N100 in a company and the
company happens to go into liquidation because of in solvency etc Mr. A will
only lose the N100 he invested in the business. This is unlike the sole trader
or partnership where as a result of business failure, the owners have to sell
even their property outside the business to pay for all the debt incurred by
the business.
2. Because the company can raise capital through many
sources, it can be expanded to any size the board of directors may deem
necessary.
3. There is continuity of the business the death of a
member does not lead to the end of the business. If a member dies, his shares
can be transferred to his children or they may be sold if the children do not
want to continue with the share holding. When these shares are sold the
ownership changes hand but the business continues to exist irrespective of who
owns it.
4. The public company is an open company this means that
the company is open to anybody who wants to becomes a co-owner. The is possible
through the buying of shares of the company. Workers employed to work in the
company may become co-owners if they want to by buying shares of the company.
DISADVANTAGE OF JOINT STOCK COMPANY:
1. Joint Stock Company has no privacy the statement of
account of the company is usually made public so that members of the public
know its financial position.
2. The company has no tax advantage since the financial
position of the company is always made public, the government can easily
ascertain the amount of money the company make as profit. This profit is
usually taxed heavily after allowance has been made for incentive motive.
3. Shareholders who are the real owners of the business
do not control the business. They live in different part of the world although
it is expected that they should elect the members of the board of directors who
control the business in most cases only a few shareholders attend meetings
where board members are elected.
4. The management is made up of salaried persons.
Sometimes they may pursue policies aimed at achieving their own selfish ends.
This may be against the interest of shareholders in precise terms, the
management may misappropriate funds of the company thereby reducing the profit
of the company. This is against the interest of the shareholders.
DEBENTURE:
A
debenture is a loan capital or corporate bond. it is as instrument for a
limited liability company to raise long term capital. It is not a share and so
debenture holders are not co-owners of the business. They are creditors to the
company. They don’t share the risks of the business like shareholders and have
no say in the management of the business. A debenture is a fixed interest
bearing security with a specified maturity date. The owner can claim his
capital on maturity. Debenture holders receives a fixed rate of interest on
their capital. They are entitled to their interest payment whether profit are
made or not and are paid before any dividends can be paid to the shareholders.
If the business fails, the debenture holders are first repaid their capital
before the shareholders.
There are two major types of debenture:
1.
Mortgaged debentures: such
debentures are issued on the security of the company fixed assets. If the
company is not able to pay the fixed rate of interest or to repay the loan on
maturity, the fixed assets of the company such is land and buildings are sold
and used first to meet the debts owed to mortgaged debenture holders.
2.
Floating debentures: Floating debenture
are not tied to any particular asset of the company. However, they have to be
paid their fixed rate of interest whether profit are made or not.
PRIVATE ENTERPRISES:
Main
features or characteristics of private enterprises are as followings:-
1.
The business is
owned and run by private individuals or groups of individuals. They include the
one-man business, the partnership, and the limited liability companies.
2.
Capital is
provided by private individuals. Such capital could be from past savings, or
money borrowed from friends or banks (as with the sole proprietorship and
partnership). The limited liability companies raise capital from commercial
banks and other specialized institutions, or through the issue of shares and
debentures.
3.
The main aim of
setting up private business concerns is to maximize profits.
4.
Business risks
are borne by the owners who may be sole proprietors or partner in the small
business, or the shareholders in the companies of high profits are made, they
gain but if there are no profits, they lose.
5.
Control and
management of the business is in the hands of private individuals. The sole
proprietor controls and manages the business himself. Control of the business
in the limited liability companies is exercised by a board of directors
appointed by the shareholders. They make policy decisions, while the day to day
running of the business is the responsibility of the managers or managing
director employed by the owners.
6.
Private enterprises
are accountable to the owners. In the large business concerns an annual
statement of income and expenditure is given by the management to the
shareholders.
Three
that require registration:
The partnership:
A
partnership could be defined as an unincorporated business formed by an
association of two to twenty persons, who by an agreement, (usually legal)
decide to run a business together and share the risks and profits of the
business. In Nigeria the companies act limits the number of partners. The
maximum number of partners is likely to differ from country to country.
Feature:
1.
The number of
partners in Nigeria ranges from two to twenty for most business, but two to ten
for a banking business.
2.
The partners
usually take the major decisions together.
3.
The partners
contribute capital or skill or both, according to the agreement reached in
return, each of them receives a proportion of the profits as agreed in
addition, money could be borrowed from banks.
4.
The partners bear
the risks of the enterprise jointly with the exception of the limited partner,
the partners have unlimited liability.
5.
The business is
not a separate legal entity and cannot therefore sue or be sued in its own
name.
6.
The business has
no board of directors. The control and management of the business is in the
hands of the active partners.
Types:
There
are two major types of partners: the ordinary or general partner, and the
sleeping or limited partner. In addition to the contribution of capital, the
ordinary partner takes an active part in the organization and management of the
business. He has unlimited liability.
The
sleeping partner is the partner who contributes capital but takes no active
part in the organization and management of the business in most cases, he has
limited liability. A limited partner does not receive a dividend. He receives a
fixed rate of interest on his capital.
Articles
of partnership:
A
partnership is usually governed by a written agreement which is usually drawn
up by a legal practitioner the agreement is called a deed of partnership or the
articles of partnership. The deed of partnership gives some details about the
business such as:
1.
The name of the business.
2.
The nature of business to be undertaken
3.
The amount of capital or resources to be contributed by each partner.
4. How profits and losses are to be shared
among the partners.
5. How the partnership may be brought to
an end, if need be.
6. How responsibility for the management
of the business is to be shared or delegated.
7. The method for admitting new partners.
The partnership is common among lawyers, accountants, architects and other
professionals who are privately employed.
Merits of partnership:
The partnership has a number of advantages.
1. Capital is more easily obtained, either to begin the
business or for business expansion than in thee sole-proprietorship the partners
can raise more capital by pooling their resources. The partners also find it
easier to borrow money lenders have greater confidence in a group of persons
than in only one person. Also, a group may be in a better position to offer the
collateral security required for obtaining loans from banks.
2. The business has greater continuity than the sole
proprietorship. The death of a partner may not lead to a total dissolution if
the business since the other partner can still go ahead. Also, a partner can
enjoy holidays, or take a rest due to illness, without adversely affecting the
normal course of business.
3. There is privacy in conducting business affairs. Like
the sole proprietorship, the partnership can keep its business affairs private
since it is not required to make its accounts available for public inspection.
4. Business risks are shared among more people. Each
partner is jointly liable with his co-partners for all the debts of the
partnership. This reduces the liability of each partner in the event of business
failure.
5. There is the advantage associated with specialization
there could be specialization among the partners in the organization and
management of the business. Some partners may specialize in sales, auditing,
administration advertisement, etc. this could lead to greater efficiency.
6. The diversity of talents and skills which exist in the
partnership could led to greater business efficiency. Each partner may have a
special skill or talent which may lead to greater success of the business. The
introduction of new partners could help to bring in extra talent and new ideas
to make the business more successful.
7. There is the likelihood that better decisions would be
taken. Since decisions are jointly taken, each partner will contribute his own
ideas. The best ideas are taken, and the partners are likely to come up with
better business decision, hence, the saying that two head are better than one.
8. There is still personal contract with both employees
and customers. This is because of the relatively small size of the business
when compared with the limited liability companies.
9. Like the sole proprietors, the partners can set up
another small business. Also, while having a joint business, each of them could
still run another small business on his own.
Disadvantages of partnership:
1.
The partnership
has limited capital. The maximum number of partners in the partnership is
twenty therefore, the amount of capital that can be contributed. by the members
is relatively small compared with those of companies. It cannot raise capital
by issuing debentures and shares. The limited resources of the business limit
business expansion.
2.
There is
unlimited liability for the active partners as there is for the sole proprietor
if the business fails, the private assets of the active partners may have to be
sold to meet the business debts.
3.
The business may
not have perpetual existence. The death or withdrawal of a partner may lead to
the end of the partnership. If a partner dies, his relative may want to
withdrawal his share in the business the death or withdrawal of a partner may
necessitate the drawing up of new partnership agreements. Therefore, the
continuity of the business may be adversely affected.
4.
The business is
not a separate legal entity. A partnership cannot sue or be used in its own
right the partners can be sued separately or jointly as a result of may breach
of contract on the part of the business.
5.
Each partner is
responsible for the action of the others. Each partner can enter into a
contract for the partnership which is binding on the others. This is
disadvantageous because a partner may be called upon to pay for losses caused
by the faults of his partners.
Limited liability companies:
Limited
liability companies are of two types the private limited liability company or
the close company and the public limited liability company or the joint stock
company.
The private limited liability company
features:
1.
The number of
owners (who are shareholders) ranges from two to fifty. They own the business
and bear the risks jointly.
2.
The business is a
separate legal entity. It is recognized as a personality in law it is quite
distinct from the owner in the eyes of the law. The business can sue or be sued
in its own name without involving the owners it is registered as a company a corporate
body.
3.
The shareholders
have limited liability in the event of business failure the amount which a
shareholder can lose is limited to the fully paid up value of his share or the
capital he has invested in the business. His personal assets are protected by
the law.
4.
There is
continuity of business operations. The withdrawal or death of a shareholder may
not affect the existence of the company.
5.
There is a board
of directors who control the business by taking most of the major decisions.
Management or day to day running of the business is in the hands of a managing
director.
Advantages of private limited companies
1.
They can raise
capital more easily than the sole proprietorship or the partnership. They can
raise capital by issuing debentures, unlike the sole proprietorship or
partnership. It can also borrow money more easily from banks. Since the maximum
number of shareholder is up fifty, more capital can be raised through selling
shares.
2.
The shareholder
have limited liability if the business fails, the lose only the full paid up
value of their shares in the business the shareholders personal assets are thus
protected from business bankruptcy or insolvency.
3.
The business is a
separate legal entity. The owners are different from the business in law. The
business can use or be sued in its own name. The owners of the business can not
be sued personally for breach of contract on the part of the business.
4.
The business
enjoys internal economics of large-scale production. Since the business is
large production can be carried out on a large scale, leading to economics in
production.
5.
The business has
greater continuity than the sole-proprietorship or partnership. The illness or
death of a shareholder does not affect business operations adversely. The
business continues to exist unless it becomes bankrupt or is wound up.
Co-operative associations:
A
co-operative society is a form of private business organization. It is a self
help organization formed either by consumers or producers who have common
interests. It is therefore set up for the benefit of the members who have
pooled their resources.
Characteristic:
1.
There is no limit
to the size of it membership. It is usually open to persons with identical
interests who high to join.
2.
Profit or
dividends are shared according to the purchases from or sales to the society
within a given trading year, that is, according to the member’s patronage. All
the member bear the risks of the business together.
3.
They have
unlimited liability.
4.
The aim of
setting up a co-operative society is to help the members who have pooled their
resources.
5.
A co-operative
society is a high democratic form of business organization. Each members has
one vote only and can stand for election into an office. They have equal right.
Although a management committee is elected to run the business, the control of
the business in the hands of all. Each of them takes part in major decisions.
Types of co-operative associations:
Different
types of co-operatives exist in West African
1. Producer’s co-operatives:- A producer’s co-operative
society is an association of producers of a particular commodity. They usually
come together for the purpose either of producing the commodity or of marketing
their products. A numbers of producers could pool their resources and produce jointly
they could be farmers, industrialists, etc. a good example of a producers
co-operative is an agricultural co-operative society. Agricultural
co-operatives are very common in West African countries. Amy small scale
farmers pool their resources in order on order to produce on a large scale and
enjoy economics of large scale production. The farmers could jointly own and
cultivate hand for planting food crop such as yams, maize, cassava or cash
crops such as coca, palm produce, cotton etc. They could also practice other
forms of agricultures such as poultry-rearing fishing, forestry, etc. There are
also industrial co-operatives which engage in manufacturing.
2. Consumer’s co-operatives: A consumer co-operative is
an association of consumers. They buy goods in bulk at wholesale prices and
sell them at retail prices to both members and non-members of the co-operative.
Consumers’
co-operative societies do not usually take part in the production of the
commodity which they sell. They are usually concern with the marketing or
distribution of commodities.
Why
some should be registered and why some should not be registered are:
Those
does require registration, them the one who take their risks by themselves and
also some does not pay tax and take it as a profit in the business.
Why
those are require registration their obtain the power or authority over their
business, make them to have the confidence over their business and also to
pertronis in the market by the government authority and power over their
business, and in the international.