Business: – Business is a human activity, which is undertaken to provide goods and services to the
people with a view to earn profit.
Material Organization: –is the determining and provision of necessary raw materials, tools, capitals etc. to enterprises for their smooth running and functioning. Human Organization: –is the appointment of qualified staff and assigning them different duties and responsibilities for the sake business organization interest. Business Organization: A business organization is an entity aimed at carrying on commercial enterprise by providing goods or services, to meet needs of the customers. All business organizations: have the common features such as formal structure; aim to achieve objectives, use of resources, requirement of direction, and legal regulations controlling them. The term “business organization” describes how businesses are structured and how their structure helps them meet their goals. In general, businesses are designed to focus on either generating profit or improving society. When a business focuses on generating profits, it is known as a for-profit organization. When an organization focuses on improving the social good through the arts, education, health care, or some other area, it is known as a nonprofit (or not-for-profit) organization and is not typically referred to as a business. Forms of Business Organization: 1. Sole Proprietorship A sole proprietorship is a business owned by only one person. It is easy to set-up and is the least costly among all forms of ownership. The owner faces unlimited liability; meaning, the creditors of the business may go after the personal assets of the owner if the business cannot pay them. The sole proprietorship form is usually adopted by small business entities. Any individual may engage in business and still act as the entrepreneur. Under this form of organization, the individual assumes the management of the business. He usually owns the capital. He supplies and direct the business and is in charge of its details. Individual Proprietorship is best suited to enterprises that are simple in nature, and require, in most cases, small capital and minimum risks. This form of organization is the most common in economic society. It is also common in trade, especially in the retail trade. Advantages It is easy to organize. With a small capital, one can start a business without undergoing all kinds of formalities and requirements. The owner of a small business is stimulated to do his best. He knows that the success of his business depends upon himself. He is his own boss. He is responsible to himself alone. The entrepreneur may make a large or small profit, depending upon his industry and ability. The business can be easily closed. Any time the owner decides to quit, he can go out of business. Disadvantage The size of the business is necessarily limited by the amount of capital that the owner can put up. The owner has to depend upon his own skill and knowledge, because he cannot turn to anyone or advise. He must solve and meet any problem himself. If the owner dies, the business stops. The life of the business is generally limited by the life- span of the founder. Since the owner gets all the profits, he must also assume all the debts. If the debts are big, his entire property may be needed to satisfy the claims of creditors. 2. Partnership A partnership is a business owned by two or more persons who contribute resources into the entity. The partners divide the profits of the business among themselves. In general partnerships, all partners have unlimited liability. In limited partnerships, creditors cannot go after the personal assets of the limited partners. A business organization owned and manage by two or more persons under a partnership agreement. The partnership represents a joint undertaking of two or more persons. In this form of business organization, the agreement usually state's that the individuals jointly own and operate the business. In this kind of business organization there may be "silent partners ". Advantages The partnership can have more capital than individual proprietorship, since there are more persons who furnish the capital needed. The different partners may be specialists in different lines of business, and each partner may take charge of a department of the business which he knows best. The amount of money that the partnership can borrow is greater than what the individual proprietorship can, because every partner can be held responsible for the payment of the debt. Disadvantage The partnership is dissolved when one of the partners dies or retires. Like the individual proprietorship the life of the partnerships limited by the natural lifespan of any partners. Every partner is responsible for the debts of partnership. The entire property of any one of them will have to answer for the debts of the business if the other partners have no property. The partners may disagree as to methods of running the business, and disagreement is not conducive to the efficiency of the management. Any one of the partners may be dishonest and betray the trust of the firm, or commit serious mistakes which may involve the partnership in heavy losses. 3. Corporation A corporation is a business organization that has a separate legal personality from its owners. Ownership in a stock corporation is represented by shares of stock. The owners (stockholders) enjoy limited liability but have limited involvement in the company's operations. The board of directors, an elected group from the stockholders, controls the activities of the corporation. Corporation is an association of individuals authorize by law in legal instrument called a charter, to engage in a particular kind of business. The corporation is an important form of business organization in highly developed countries. The corporation papers state the name of the corporation, its purposes, the duration of the charter, and the names and addresses of person seeking to become members. The papers are submitted to the Security and Exchange Commission which registers the corporation and gives permit if everything is found in order. Then the corporation makes its own by laws to govern its internal organization. The Charter of Corporation Is the instrument given by the government which specifies its rights and functions? The corporation exercise only such powers are provided in its charter. If the corporation violates the provision of its charter, the state may revoke it. The charter provides for the length of the life of corporation, say 25 years or more. The Capital of Corporation The corporation gets its capital by selling its stocks to investors or by borrowing through the sale of bonds. The corporation has two important classes of securities in the form of stocks and bonds. Advantages The corporation, unlike the individual proprietorship or partnership, can attract and induce the capital and savings of many individuals who may want to invest in a business enterprise. Investment in the corporation is shown by shares of stock which represent the part ownership of the stockholders in the business. The corporation has perpetual life. The death of a stockholder has no effect upon the life of the corporation. The corporate charter is granted for a limited number of years, but in can be easily renewed. The stockholders have limited liability. This means that the stockholders are liable only to the extent of their investment in the share of stock the hold. They cannot be made to pay any debt of the corporation beyond their investment, unlike individual properties and partner whose private funds and entire fortune are answerable for the debts of the business. The share of stock that a stockholder owns can be easily transferred. Share of stock are freely traded in the stock exchanges. If a stockholder wants to get back what he has invested, the share ca be sold for cash. This facilitates the change of ownership and control. One requires no permission from the corporation to sell one's share. Disadvantages The management of a corporation is in the hands of hired individuals who may not be interested in the business. Hired men may be reckless in their method of running the affairs of the corporation. Control over the majority of the stock would mean the control of the affairs of the corporation. This concentration of control may lead to the abuse of power, to the disadvantage of the minority stockholder. the relation between the stockholders and corporation is not often very close. So long as the stockholders get their dividends or the earning of their stocks, they leave the management to the board of directors which may abuse the employees or promote the interest of individual members of the board at the expense of the corporation as a whole. The corporation is closely watch by the government, and it has to submit periodic reports of its activities. No such reports are required from individual proprietorship or partnership. ABUSES AND DANGERS OF CORPORATION Dishonesty of Promoters – the possibilities and profitableness of a business enterprise are brought to the attention of investors by promoters. Promoters are the person who take the initiative in starting and inducing investors to put their savings in a business enterprise. Stock- Watering or Overcapitalization- the stocks issued by a corporation represents the assets or property of the business. This is known as overcapitalization or stock- watering. The excess in the amount of stocks issued, which does not represent any property, often goes to the dishonest management to the great disadvantage of the stockholders. Dishonesty of Management- the officers of the corporation not infrequently manage the business for the purpose of enriching themselves. The officers of the corporation do not often exercise the same care and are not imbued with the same moral responsibility in managing the affairs of the corporation as in managing their own business. They invest the funds of the corporation in the stock of other corporations and get a large share of the profits if the venture succeeds, but would let the corporation bear all the losses if the venture turns out to be a failure. Payment of High Salaries and Bonuses- since the board of directors control the management of the corporation, they often pay themselves ridiculously excessive salaries and bonuses. Their friends may be employed in the corporation with a salary far too high for the work they perform. Absentee Ownership- the shareholders of a big corporation may know nothing about the affairs of the business, because they are scattered all over the country or are residing in other countries. They are interested only in getting their dividends, and provided they get large dividends they are willing to leave the management to the board of directors. The security and exchange commission- to control the organization of corporations and the sale of corporate securities the national assembly passed commonwealth act no. 83, known as the securities act. The securities and exchange commission requires accurate statement and publication of all important facts in the financial affairs of corporation, so that the investors may know the kind of business in which they are investing their savings. No securities, stocks or bonds, can be issued without the approval of the securities and exchange commission. Heavy penalties are provided for violations of the provisions of the act. 4. Limited Liability Company Limited liability companies (LLCs) in the USA, are hybrid forms of business that have characteristics of both a corporation and a partnership. An LLC is not incorporated; hence, it is not considered a corporation. Nonetheless, the owners enjoy limited liability like in a corporation. An LLC may elect to be taxed as a sole proprietorship, a partnership, or a corporation. 5. Cooperative A cooperative is a business organization owned by a group of individuals and is operated for their mutual benefit. The persons making up the group are called members. Cooperatives may be incorporated or unincorporated. Some examples of cooperatives are: water and electricity (utility) cooperatives, cooperative banking, credit unions, and housing cooperatives. A cooperative is an association of individuals organized for the purpose of performing or supplying essential economic goods and services for the group. The cooperative system- this is an enterprise that the main motive of which is to secure cooperation in business. The cooperative is any association organized to buy or sell goods in the most advantageous manner possible by the elimination of the middle men’s profits. The two most common types of cooperatives are the consumers’ and the producers’ cooperative. o The producers’ cooperative is a form of a cooperative enterprise financed by the members who have putted their capital together. o The consumers’ cooperative is a form of cooperation which aims to secure, for the consumers, commodities at lower prices. 6. Government corporation- before the inauguration of the commonwealth of the Philippines, the Philippine government had already adopted the policy of going into business. Upon the inauguration of the commonwealth government, this economic policy received greater stimulus. Our economic planning resulted in the establishment of new corporations and in the revitalization of those in existence the national development company was reorganized and expanded, and its capital was increased. Other organizations like the national rice and corn corporation, the insular refining corporation, the national food products corporation, the national abaca and fibers corporation, the national coconut corporation, the national tobacco corporation, and the national footwear corporation were established. Scope of Business Organization The scope of business organization has considerably expanded after the Industrial Revolution. The process of production is now quite complicated. An organization is needed to determine what each person will do and how much authority each will have. 1) In Sole Proprietorship Form of business, the organization structure is very simply. The entrepreneur generally introduces his own capital. He alone is the sole organizer, financier, decision taker, operator, and controller and above all responsible for air the success and failures of business, there is generally rule sub-division of main work into small groups. (2) In a Partnership Form of Business Ownership, each partner provides capital, labor and management according to an agreement the partners determine among themselves the extent to which each partner shall take part in the management. The pattern of division of activities, determine responsibilities. Delegation of authority etc. depends upon the nature and size of business. As the partnership business is generally run on small scale, the business organization structure is relatively simple, temporary and informal. (3) In a Company Form of Business There is a formal pattern of organization. The work of organization begins even before its incorporation by the promoters. This work of organization continues after incorporation. An organization chart of responsibilities is prepared. The duties and responsibilities of the personnel employed are defined, procedures are aid down. Methods are evolved discussed and put before the personnel in clear terms. The scope of business organization in corporate business is quite wide and complicated. A business organization is one or more businesses controlled in common by a person or group of people. An organization may have one or more businesses. A business may not have more than one organization. Even in the case of franchises, the franchisor is a different business model than the franchisee, even though they exist symbiotically in the same value system. An organization exists for a purpose. Hopefully for a moral purpose, or ideal, that is never fully achieved. The organization's pursuit of its purpose requires a structure for cooperation to endure for long periods of time, beyond the people's tenure in the organization. Enduring beyond the tenure of individuals enables more effective pursuit of purpose, with more complex business models, than could be attained if all people were freelance contractors. Products Growth. All business activities directed towards the production of goods and services in betterment of business organization. Efficient Use of Resources. Organizations play a vital role in the efficient use of factors of productions and other resources and thus reduced the cost of production of goods. Technological Improvements. A good organization provides for the optimum use of technologies improvements. Creative thinking. It stimulates independence creative thinking in various departments of production. Use of skilled salesman. Another importance of business organization is that it is very useful in providing skilled salesmanship for satisfying the various needs of the customers. Quick decisions. The business organization makes easy to take quick decisions. Recognition of the problem. The recognition of the problem, selection of the solution, issuing of the necessary orders can be taken in the right time. Fixing of responsibility. One of the most important things of business organization is that fixing of responsibility can easily be pin pointed. Feedback. An organization makes it possible to take decisions in the right time about production and thus may take feedback. Before making any decision organization always research the market and combine the facts. Minimum cost. The organizations always try to attain the goals and objectives of the business at the minimum cost. Five Functions of business Organization 1. Organizing Function: One of the main functions of a business is organizing function. Man, machine, materials, and money are essential factors for any business. organizing function collects and coordinates all the necessary factors of the business. Proper organizing function is helpful in the smooth running of the business and helps to achieve its objectives. 2. Financing Function: Finance is the life-blood and back bone of any business. The availability of factors of production depends upon the availability of finance. So every business needs finance for its success. Therefore, under this function of business required capital is estimated, accumulated and properly utilized. A proper capital structure according to the size and nature of the business is essential for the success of the business. 3. Production Function: The production function is another important function of the business. Converting raw materials into finished products to satisfy human wants by creating utility is known as production. Under this function, raw materials and semi-finished products are processed and assembled to create utility. Hence the next important function of business is to create utility for the satisfaction of the consumers by the production of goods. 4. Marketing Function: The function of business is not complete with the production of goods and services only. The main goal of production is to satisfy human wants through the consumption of goods and services. Therefore, marketing function helps to transfer goods and services from the producer to the ultimate consumer. Marketing functions can be divided into concentrating and dispersing which include buying, selling, transportation, storage, risk taking, market information, etc. 5. Employment Function: The next important function of business is to provide employment opportunities in the country. Every business requires a large number of manpower to perform their activities. So they are helpful in solving employment problem of the country by providing maximum employment opportunities. “Organize Your Business: Whether it’s getting involved with business associations socially and civilly, or it’s hiring a lawyer and tax expert to help you structure a business, getting organized should be a priority for every business owner”