ORGANISATION OF BUSINESS

ORGANISATION OF BUSINESS

Legal and financial aspects are closely linked to business because, before any business starts, capital must be obtained. The amount and nature of capital, methods of raising it as well as the manner of its control obviously depend on the type of business organization

The simplest form of business organization is the one-man business or sole trader (sole proprietor) who has control of his capital with almost complete freedom from external interference.

This business can succeed particularly where commodities such as foodstuffs tobacco, sweets, newspapers are in regular demand and where the market is local But there are also serious disadvantages since a sole trader's responsibility is great and the expansion of such a business is limited to the financial' resources of the owner.

When further capital or specialization is needed this generally leads to another type of organization, the partnership.

A partnership may consist of a small number of persons called partners that contribute the capital for the business, either in equal or in agreed proportion. They may take an active part in the management of the business but the share the resulting profit or loss as well. The partners who play an active part in the management of the business a known as active partners as distinct from the other sleeping partner Accountants, solicitors, doctors and brokers usually work in partnership.

A company is a more complex business organization consisting of an associate: of people who both contribute capital and agree to share the resulting profit or loss.

In the UK, the joint stock companies can be set up by Royal Charter of England), by a special Act of Parliament (companies which are usually monopoly of public utility services such as railways, canal, gas, water and by registration.

Registration is the most usual way and the companies in which the members are limited to the value of their shares are of two types: private companies and public limited companies.

The private limited companies have the letters LTD after their name and consist of a number of; members (shareholders). The shares are held among their members companies are not allowed to invite public to subscribe shares or debenture; to transfer shares is only with the consent of the directors and this restriction implies a high degree of risk.

The public limited companies have the letters PLC added to their name and consist of a number of members and they can offer their shares for sale. Like the private ; companies, the PLCs have limited liability but, unlike the former, the shareholder can sell their shares to people who wish to buy on the Stock Exchange. The capital of the PLCs must amount a minimum of 50.00

Another form of business, i.e. temporary partnerships   constituted for carrying out one particular trading objective are called joint ventures. The partnership is dissolved after the venture is completed.

Topic comprehension

1. Answer the following questions

Vocabulary

Topics for speaking and written essays