Business Environment

- Refers to outside forces affecting the business operation that are beyond the control
of the business and is directly or indirectly affects how the enterprise function.

Environmental forces- uncontrollable forces ouutside the organization

Unconrtrollable forces in the external environment
Socio cultural environment
- Refers to the structure and dynamics of individuals and groups and their behaviors,
beliefs,thougt patterns and lifestyle. For instance during christmas, occasion and
festivities there is an increase in the demand for clothes, fruits, house furnitures and
ornaments.
Political Environment
This includes the political form, the govermet policies and attitudes towards the business
community. Government attracts investors and therefore it would open a significant
opportunity for growth and expansion of an organization.
Technological Environment
- As most would say” you cannot stop the advancement in technology but you can
adapt to it changes”. Technology includes the methods, techniques and approaches
adopted for goods and services and its distribution. Technology change so fast that it
affects the industry tremendously.
Legal Environment
- Refers to the set of laws, regulations and legalities tha affect the business operation.
Competitors
- “Know the competitors” is the rule of thumb in the industry
Economic Environment
- The survival and success of every business depends fully on its economic
environment. This refers to the economic growth, interest rates inflation rates,
unemployment rates
Forms of business Organization

Sole proprietorship

- Is a business with only one owner who operates the entire business all by himself or employ
employees.
- It is the simpliest and most numerous form of business organization
- It is also the most dangerous because of the total unlimited liability that the owner has to
assume.

What are the Advantages of Sole Proprietorships?

1. Beginning a sole proprietorship is easy. Unlike other business structures, starting a sole
proprietorship requires less paperwork and time to create a legal sole proprietorship.
2. It is cheap to start a sole proprietorship.
3. Sole proprietors can employ others and grow their business. Sole proprietorships can hire others
and enjoy the tax benefits from doing so. Additionally, spouses of the owner can work for the
sole proprietorship without being declared as an employee.
4. Owners have complete and direct control over all decision making. Because the owner is the
business, the owner makes all decisions for the business rather than sharing power with a
partner or corporate board. This allows owners the freedom to drive the business in the
direction they desire.

What are the Disadvantages of Sole Proprietorships?

1. Owners are fully liable. If business debts become overwhelming, the individual owner’s
finances will be impacted. When a sole proprietorship fails to pay its debts, the owner’s
home, savings, and other individual assets can be taken to satisfy those debts.
2. Business continuity ends with the death or departure of the owner. Because the owner and
the sole proprietorship are one, if the owner dies or becomes incapacitated then the
business dies with them and the money and assets of the business become part of the
individual's estate.
3. Raising capital is difficult. Initial funds of the business are generated by the owner and
raising funds for the business can be hard since they cannot issue stocks or other investment
income. Loans may also be difficult if the owner does not have enough credit to secure
additional money.

Partnership
- business being managed and owned by two or more individuals
- partners share the liabilities and operate the business together
3 classification of Partnerships
1. General Partnerships- partners share personal liability for business debts and can make
a decision that affects the business, profit and loss are divided according to an
agreement
2. Limited Partnerships- one partner is responsible for decision making and can be held
liable for the business debts and to the extent of each partners investment
3. Limited Liability Partnerships- all partners have limited liability for the business debts.

Advantages over Proprietorships

1. Brings greater financial capability to the business.
2. Combines special skills, expertise and experience of the partners.
3. Offers relative freedom and flexibility of action in decision-making.
Advantages over Corporations
1. Easier and less expensive to organize.
2. More personal and informal.
Disadvantages
1. Easily dissolvable, and thus unstable compared to a corporation.
2. Mutual agency and unlimited liability may create personal obligations to partners.
3. Less effective than a corporation in raising large amounts of capital.
Kinds of Partners
1. General partner. One who is liable to the extent of his separate property after all the assets of
the partnership are exhausted.
2. Limited partner. One who is liable only  to the extent of his capital contribution.
3. Capitalist partner. One who contributes money or property to the common fund of the
partnership.
4. Industrial partner. One who contributes his knowledge or personal service to the partnership.
5. Managing partner. One whom the partners has appointed as manager of the partnership.
6. Dormant partner. One who does not take active part in the business of the partnership and is
not known as a partner.
7. Silent partner. One who does not take active part in the business of the partnership though may
be known as a partner.
8. Secret partner. One who takes active part in the business but is not known to be a partner by
outside parties.
Corporation
- Is owned by multiple stakeholders and is overseen by a board of directors who were
elected by the shareholders.
- The shareholders gains profit through dividend or appreciation of the stocks
- It can raise additional funds through the sale of stock, and can easily transfer
ownership by selling their share of stocks

Advantages

 Generally, a corporation's shareholders are not liable for any debts incurred or
judgments handed down against the corporation. Shareholders only risk their equity
in the corporation.
 Corporations may be able raise additional funds by selling shares in the corporation.
 Corporations may deduct the cost of benefits it provides to employees and officers.

Disadvantages

 Forming a corporation requires more time and money than forming other business
structures.
 Governmental agencies monitor corporations, which may result in added paperwork.
 Corporate profits may be subject to higher overall taxes since the government taxes
profits at the corporate level and again at the individual level, if such profits are
distributed to the shareholders. Furthermore, a corporation may not deduce from its
business income any dividends it pays to its shareholders.