INTRODUCTION TO MANAGEMENT Definition of 'Business' 1. An organization or enterprising entity engaged in commercial, industrial or professional activities.

A business can be a for-profit entity, such as a publicly-traded corporation, or a non-profit organization engaged in business activities, such as an agricultural cooperative or other non- governmental organizations. 2. Any commercial, industrial or professional activity undertaken by an individual or a group. 3. A reference to a specific area or type of economic activity. Businesses include everything from a small owner-operated company such as a family restaurant, to a multinational conglomerate such as KFC To "do business" with another company, a business must engage in some kind of transaction or exchange of value with that company In this sense, the word "business" can be used to refer to a specific industry or activity, such as the "real estate business" or the "advertising business".

DEFINITION OF MANAGEMENT & ITS FUNCTIONS Management is the process of working with and through people and other organizational resources, to reach organizational goals Management has the following 3 characteristics: 1. It is a process or series of continuing and related activities. 2. It involves and concentrates on reaching organizational goals. 3. It reaches these goals by working with and through people and other organizational resources. MANAGEMENT FUNCTIONS: The 4 basic management functions that make up the management process are described in the following sections: 1. PLANNING 2. ORGANIZING 3. INFLUENCING 4. CONTROLLING.

PLANNING: Planning involves choosing tasks that must be performed to attain organizational goals, outlining how the tasks must be performed, and indicating when they should be performed. Planning activity focuses on attaining goals. Managers outline exactly what organizations should do to be successful. Planning is concerned with the success of the organization in the short term as well as in the long term. ORGANIZING: Organizing can be thought of as assigning the tasks developed in the planning stages, to various individuals or groups within the organization. Organizing is to create a mechanism to put plans into action. People within the organization are given work assignments that contribute to the companys goals. Tasks are organized so that the output of each individual contributes to the success of departments, which, in turn, contributes to the success of divisions, which ultimately contributes to the success of the organization. INFLUENCING: Influencing is also referred to as motivating, leading or directing. Influencing can be defined as guiding the activities of organization members in the direction that helps the organization move towards the fulfilment of the goals. The purpose of influencing is to increase productivity. Human-oriented work situations usually generate higher levels of production over the long term than do task oriented work situations because people find the latter type distasteful. CONTROLLING: Controlling is the following roles played by the manager: 1. Gather information that measures performance 2. Compare present performance to pre-established performance norms. 3. Determine the next action plan and modifications for meeting the desired performance parameters. Controlling is an on-going process.

Definition of Want vs. Need Definition A want " is defined as having a strong desire for something. A need " is defined as lack of the means of subsistence. In every arena of life, the two concepts are opposing elements.

The principle behind these two basic opposing eliminates is dualism . "Dualism is any theory or system of thought that recognizes two and only two independent and mutually irreducible principles or substances, which are sometimes complementary and sometimes in conflict" (Choudhury 1994).

CONSUMER DEMAND THEORY: The branch of economics devoted to the study of consumer behaviour, especially as it applies to decisions related to purchasing goods and services through markets. Consumer demand theory is largely centered on the study and analysis of the utility generated from the satisfaction of wants and needs. The key principle of consumer demand theory is the law of diminishing marginal utility, which offers an explanation for the law of demand and the negative slope of the demand curve. Consumer demand theory provides insight into an understanding market demand and forms a cornerstone of modern microeconomics. In particular, this theory analyzes consumer behaviour, especially market purchases, based on the satisfaction of wants and needs (that is, utility) generated from the consumption of a good. Doing Demand Demand, the willingness and ability to purchase a range of quantities at a range of prices, is one half of the market. The law of demand, which gives rise to a negatively-sloped demand curve, is an essential principle underlying market analysis. Modern microeconomic theory, among other topics, is concerned with understanding and explaining the law of demand. Insight into this law can be found with consumer demand theory. The explanation is relatively simple--on the surface. Consumers purchase goods that satisfy wants and needs, that is, generate utility. Those goods that generate more utility are more valuable to consumers and thus buyers are willing to pay a higher price. The key to the law of demand is that the utility generated declines as the quantity consumed increases. As such, the demand price that buyers are willing to pay decreases as the quantity demanded increases. Details

Customer needs analysis technique is used to identify those customers of the enterprise whose satisfaction is critical and to determine what will produce that satisfaction for them. It is a way of communicating directly with customers of the enterprise to understand their viewpoint, eliminating misinterpretation and misunderstanding. Purpose The purpose of customer needs analysis is to identify the customers whose satisfaction is critical to the success of the enterprise and to determine their needs and what will produce satisfaction for them. This information is used in assessing the performance of the

enterprises value stream(s). Benefits The benefit of using the customer needs analysis technique is that it provides a systematic method for collecting, distilling and prioritizing customer needs. It defines what will most satisfy the value stream customer by communicating directly with the customer. As the customers express their needs directly, there is no misunderstanding or misinterpretation of the customers viewpoint. Customer Needs Rule Customer needs must be obtained directly from the customer, not from the perceptions of their needs. Members of the project team or management of the enterprise may believe that they "know" what the customer needs; however, this information is too often filtered, slightly altered, and unintentionally misrepresented. The customers must speak for themselves for customer needs analysis to be of true value. AIM OBJECTIVE An end that can be reasonably achieved within an expected timeframe and with available resources. In general, an objective is broader in scope than a goal, and may consist of several individual goals. Objectives are a basic tools that underlying all planning and strategic activities. They serve as the basis for policy and performance appraisals. Objectives give the business a clearly defined target. Plans can then be made to achieve these targets. This can motivate the employees. It also enables the business to measure the progress towards to its stated aims. To attempt or intend to reach a certain goal. "I aim to finish this project in a week or less." A specific goal or purpose. "My aim is to be a strong, hard-working employee." An aim is where the business wants to go in the future, its goals. It is a statement of purpose, e.g. we want to grow the business into Europe.

The most effective business objectives meet the following criteria: S Specific objectives are aimed at what the business does, e.g. a hotel might have an objective of filling 60% of its beds a night during October, an objective specific to that business.

M - Measurable the business can put a value to the objective, e.g. K 10,000 in sales in the next half year of trading. A - Agreed by all those concerned in trying to achieve the objective. R - Realistic the objective should be challenging, but it should also be able to be achieved by the resources available. T- Time specific they have a time limit of when the objective should be achieved, e.g. by the end of the year. Specific Measurable Achievable Realistic Time bound clear i.e. and able possible not 'pie associated with easy to to a to be be in specific understand. quantified. attained. the sky'. time period.

The main objectives that a business might have are: Survival a short term objective, probably for small business just starting out, or when a new firm enters the market or at a time of crisis. Profit maximisation try to make the most profit possible most like to be the aim of the owners and shareholders. Profit satisficing try to make enough profit to keep the owners comfortable probably the aim of smaller businesses whose owners do not want to work longer hours. Sales growth where the business tries to make as many sales as possible. This may be because the managers believe that the survival of the business depends on being large. Large businesses can also benefit from economies of scale. A business may find that some of their objectives conflict with one and other: Growth versus profit: for example, achieving higher sales in the short term (e.g. by cutting prices) will reduce short-term profit. Short-term versus long-term: for example, a business may decide to accept lower cash flows in the short-term whilst it invests heavily in new products or plant and equipment. Large investors in the Stock Exchange are often accused of looking too much at short-term objectives and company performance rather than investing in a business for the long-term. Alternative Aims and Objectives Not all businesses seek profit or growth. Some organisations have alternative objectives.

Examples of other objectives: Ethical and socially responsible objectives organisations like the Co-op or the Body Shop have objectives which are based on their beliefs on how one should treat the environment and people who are less fortunate. Public sector corporations are run to not only generate a profit but provide a service to the public. This service will need to meet the needs of the less well off in society or help improve the ability of the economy to function: e.g. cheap and accessible transport service. Public sector organisations that monitor or control private sector activities have objectives that are to ensure that the business they are monitoring comply with the laws laid down. Health care and education establishments their objectives are to provide a service most private schools for instance have charitable status. Their aim is the enhancement of their pupils through education. Charities and voluntary organisations their aims and objectives are led by the beliefs they stand for. Changing Objectives A business may change its objectives over time due to the following reasons: A business may achieve an objective and will need to move onto another one (e.g. survival in the first year may lead to an objective of increasing profit in the second year). The competitive environment might change, with the launch of new products from competitors. Technology might change product designs, so sales and production targets might need to change. Examples of business objectives Lets go through the list of business objectives for a restaurant and transform poorly written business objectives into something you can pitch to investors Sample business objective #1: Become profitable The problem with such an objective is that it is over generalized. How would you know that youve achieved this goal? Will your business be profitable if you make 50K? 70K? 5 million? And this goal obviously lacks time bounds. Better variant: Cash break-even by the end of Year 1

Sample business objective #2: Minimize expenses Most businesses aim at minimizing expenses. But again you should be more specific while setting such a goal. There is sure a limit for minimizing the costs: as the lower you go, the more you lose on the quality side. Better variant: Keeping food costs at no more than 40% of revenue Sample business objective #3: Serve clients fast Of course you should think about achievable and measurable formula here instead of such a general statement. Adding time limits is also a good idea. Better variant: Order serving time no more than 25 minutes Sample business objective #4: Develop our chain of restaurants Dreaming big is nice. But again how do you know your business is growing? And our chain is definitely a phrase that needs to be more specific. Better variant: Developing the Mr. BBQ Family of Restaurants: keep opening at least one new restaurant every year Aims and objectives Business activity is focused around the achievement of business aims and business objectives. A business aim is the goal a business wants to achieve. A primary aim for all business organizations is to add value and in the private sector this involves making a profit. More strategic aims include expansion, market leadership and brand building.

A business objective is a detailed picture of a step you plan to take in order to achieve a stated aim. These need to be SMART in order for the business to know what progress it has made towards achieving the objective. IMPORTANCE OF BUSINESS OBJECTIES AND AIMS The Importance Business Objectives Business objectives are a vital part of any business owner's business plan. They are the life's blood of the business plan. They are the most important thing a business owner can share

with the company. They are a statement of specific, realistic, measurable goals with a time component put on it that a company tries to adhere to. They serve to aim the company towards the goals they are shooting for and hopefully let them attain them. Goals A business is lost without goals, and that is what business objectives are. They are a statement of goals. It is important for a business owner to sit down and write out their intentions. These objectives need to be listed somewhere that not only the business owner can refer to, but also the company as a whole. By writing down goals, business objectives are a vital item in a company's arsenal. Direction Business objectives give a company direction. By stating the company's goals in specific, measurable ways, it gives direction to the company's efforts and allows every person in the company the chance to work towards those goals. It is the main function of the business objectives to provide direction to the company to guide them towards whatever goal has been specified for whatever time period has been listed in the objective. Business objectives are like an arrow pointing towards a goal. Focus By composing some decent business objectives, it gives a company the focus it needs to do business. It allows a company to know what it is focusing on. It lets them know whether they are focusing on sales or customer service, product placement or marketing. Business objectives allow everyone to know what the main thrust of the company's efforts are going to be and states it in explicit terms that everyone can understand and follow. Cohesion Business objectives allow everyone to be a cohesive unit and be on the same page. Sometimes the goals that are on the business owner's mind are not what are on the minds of the rest of the employees. If the business objectives are written out and clear, then everyone will know what the goals are and be able to pursue them to the greatest extent. Business objectives are a great tool for communication with the company and a way to make sure everyone is working together. Composing business objectives is not a hard task if care and effort are taken to complete them. It is really an easy task to complete when so many great benefits come from it. It is helpful for goals to be explicit even when one is working alone so that those goals can become a reality. Nothing beats writing down the things that are in the mind for getting them done. Business objectives are a way of getting business goals accomplished, and that's why they are so important.

Although "goals" and "objectives" may be technically different, the terms are often used interchangeably. However, they remain important -- if not critical -- to business success. Setting business objectives delivers numerous benefits to companies, while not setting goals can be dangerous. Both good and bad objectives are beneficial, while not setting goals is always damaging Benefits of Setting Objectives

Your objectives and goals deliver at least three major benefits. They define the nature and purpose of your business clearly and briefly. Over time, your goals display the wisdom of your strategy, plans, and efforts. Finally, setting objectives allow you a management by objectives (MBO) approach to making your company a success. This focuses your strategic and operations thinking on the objectives you've noted.

Good or Bad Objectives

Setting the right goals and objectives creates a road map to success. Just as the correct physical map or GPS device delivers you safely and correctly to your destination, well-thought-out objectives will help your business succeed, without regard to company size or industry. Even less effective objectives, once written, offer a map to success. Should you find that your "map" is not working as well as you'd like, you can modify, change and improve your objectives. You'll still benefit, as you have the basis of a good plan that just needs some additional or different components.

Danger in No Objectives

The only real and lasting danger is setting no goals or objectives. With no goals, it's almost impossible to create a strategy or understand the reasons for the success or failure of our business. Even when experiencing success, it's difficult to know why. You may have a general idea of the steps you took to reach success, but without written objectives, you'll never be totally sure or be able to reproduce your steps identically. More businesses have failed by having no goals or objectives than those with written strategies that needed major improvement.

DIFFERENCES BETWEEN AIMS AND OBJECTIVES What is the difference between an aim and an objective? An aim is a general statement of intent. It describes the direction in which the business will go in terms of what it will achieve. An objective is a more specific statement about what the business should or will be able to do.

Example Aim: To enable participants to write learning aims and objectives Objective: To establish the difference between aims and objectives To introduce the learning domains To provide a list of useful verbs to use when writing learning aims and objectives To demonstrate to participants how to develop measurable learning objectives To guide participants to choose appropriate teaching techniques that will achieve their learning objectives Business Strategies Definition A business strategy, according to Rapid Business Intelligence Success, is a business plan that takes place long-term in order to help achieve a specific goal or objective. The aim of a business strategy is to strengthen a particular business so that its performance increases and, in turn, the business becomes more profitable. Without a business strategy, a business has no guide to follow and has an increased risk of not succeeding. Significance A business strategy is necessary to maintain a business' performance. Business strategies are motivating, informational and change-stimulating. If you aren't motivated to form or complete the business strategy to see an end result, your business will most likely fail. A business strategy is also a wonderful tool to use when monitoring how well your business is doing over time and deciding the next step to take in your business in order to be successful. Function A business strategy is used to increase the earning potential and success of a particular business. Business strategies often have profitable results for business owners just starting out. Business strategies can range from choosing the most profitable niche for a market to successful ways business owners can promote a business. Many times, business strategies are used to improve a business or make a business better than its competitors by making use of one or more techniques. Planning a Business Strategy Like most things, business strategies require planning in order to be successful. In order to plan a business strategy, business owners should make a list of areas where their businesses need improvement and then brainstorm how their businesses can be improved. It is also beneficial to analyze competition and what other similar businesses are doing that is working for their particular market to improve their earning potential. Once a business strategy is in place, incorporate this strategy into everyday business management.

Benefits Besides the earning potential related to a successful business strategy, business strategies provide businesses a chance to become popular and unique in the business market. Some business strategies also increase customer satisfaction if improvements are made. Moreover, business owners are benefited, since a successful business strategy will remove a particular danger a business may have of failing. Business strategies give business owners a valuable means of avoiding mistakes and doing things right the first time. Bad Business Strategies Not all business strategies are effective. Some business strategies can even hurt a business if done the wrong way. For example, a well known business strategy is to promote your business by taking advantage of social networks, such as Facebook and Twitter. However, this business strategy is not effective if the business owner chooses to spam social networks when attempting to promote the business, since this will harm the business' reputation and the business will not receive many customers.

PRIVATED LIMITED COMPANY A type of company that offers limited liability to its shareholders but that places certain restrictions on its ownership. These restrictions are spelled out in the companys articles of association or bylaws and are meant to prevent any hostile takeover attempt. The major ownership restriction are: (1) shareholders cannot sell or transfer their shares without offering them first to the other shareholders for purchase, (2) shareholders cannot offer their shares or debentures to the general public over a stock exchange, (3) the number of shareholders cannot exceed a fixed figure (commonly 50 The private limited company is a proven, successful business model. The business owners hold all shares of the company privately. Shareholders may operate the business themselves, or hire directors to manage the company on their behalf. Forming a private limited company results in protection of personal assets, access to more resources, financial assistance and greater tax cuts. ADVANTAGES OF PRIVATE LIMITED COMPANY Limited Liability The greatest benefit of private limited companies is limited liability. Private limited companies, according to Apex, are treated as a single entity, making the company responsible for all debts. If anything happens to the company, its members are not personally affected; members are only liable for unpaid shares. Officers of the company retain their company salaries, they cannot be made bankrupt and they are free to form a new company, says Apex. Fraud is the only instance of unprotected liability. Tutor 2u

explains, If creditors lose money through director fraud, the directors' personal liability is without limit. Tax Advantages Private limited companies enjoy tax advantages in addition to limited liability. These companies pay corporation tax on their taxable profits and tend to be exempt from higher personal income tax rates. Forming a company instead of continuing as a sole trader or sole proprietor opens the door to more tax-deductible costs and allowances redeemable against profits. Finance and Resources When more resources or large-scale production is necessary, forming a private limited company protects the interests of lenders. With adequate funding, your company can produce goods at a lower cost, thus increasing profits and customer satisfaction. Furthermore, the future of the business becomes more secure. DIY Accounting reports private limited companies tend to retain more funds within the business to meet future financial commitments, which aids year on year growth compared to sole proprietors. Business Continuity Private limited companies enjoy permanent succession because the company is its own legal entity. Shareholders and employees act as agents of the company, writes, Tutor2u, and therefore, do not effect the company if they leave. In the event of a death or resignation, the companys Articles of Association allocate the shares to remaining members. Discontinuation of the company only occurs through liquidation or similar means. Guaranteed succession not only benefits members, but secures jobs and resources for the community DISADANTAGES OF PRIVATE LIMITED COMPANY Profit Sharing Many private limited companies, or PLCs, are very profitable. Unfortunately, these profits can become diluted because they must be evenly distributed among all shareholders, and many PLCs have up to 50 shareholders. Taxes Registered directors of PLCs must maintain impeccable records of profits and losses, including income and expenditures. These records must be kept for at least seven years and are used to complete the corporation's tax returns every year. PLCs must also pay taxes and insurance for their employees.

No Trading Shareholders in a PLC are not able to sell or transfer their shares to the general public. The 50 or so shareholders that comprise a PLC must keep their shares and cannot trade them on any stock exchange. Cost

A PLC can be very expensive to create, as it must not only pay taxes and employee insurance, but also any legal fees or other incidentals involved in the business. PLCs can also be quite complex, meaning that lawyers and accountants almost always need to be involved in the PLC from the start, which can be costly. Lack of Privacy Even though shares in a PLC cannot be publicly traded, information concerning the company is made public. Account balances and details about the company's directors, including their names and contact information, must be made available upon request. ASSIGNMENT : examples of private and public limited companies in mw PUBLIC LIMITED COMPANY Definition of 'Public Limited Company - PLC' The standard legal designation of a company which has offered shares to the general public and has limited liability. A Public Limited Company's stock can be acquired by anyone and holders are only limited to potentially lose the amount paid for the shares. It is a legal form more commonly used in the U.K. Two or more people are required to form such a company, assuming it has a lawful purpose. A Public Limited Company (PLC) means, first, that the firm is parceled out into shares and sold "publicly" on any or all the globe's stock exchanges. Secondly, it means that those who invest in the firm are protected from extreme loss if the company fails. This is called "limited liability." This means that if one invests in a firm that fails, only that investment money can be claimed by the firm's creditors. More abstractly, "limited" means that only the existing assets of the firm can be seized for the payment of debt.

A limited company grants limited liability to its owners and management. Being a public company allows a firm to sell shares to investors this is beneficial in raising capital. Only Public Limited Companies may be listed on the Malawi Stock Exchange.

ADVANTAGES OF PUBLIC LIMITED COMPANY Taxation Sole proprietors and partnerships pay individual income taxes on their earnings. Limited companies, on the other hand, may pay a corporate tax, which allows for a much wider range of deductions and allowances to reduce overall tax liability. Additionally, the rate of taxation on corporations is smaller than it is on individuals. These factors mean that a limited company almost always pays less in taxes than a similar sole proprietorship or partnership. Liability Limited companies, as discrete entities from the shareholders, provide limited liability to officers, directors and shareholders. This means that these classes of

people cannot be sued for the actions of the company. While the owner of a sole proprietorship can be held personally liable for the debts of the company, a shareholder or director of a limited company cannot. Though acts of fraud still subject directors to personal liability, in general, the officers and shareholders of a limited company have protection for their personal assets. Raising Capital Limited companies are able to issue stock to investors in the company, making it more likely that investors will be willing to contribute capital to a new venture. Sole proprietorships and partnerships are less trustworthy for the same reason that they do not have limited liability; the assets of the owners and the company may intermingle. In limited companies, because the assets must be kept separate, it is easier to to determine the valuation of a company and calculate its worth for investors. Continuity Limited companies may persist forever, provided that there are directors or officers willing to run the company. With other forms of business, the company disappears once the principal members are no longer involved. With limited companies, however, the business continues for as long as there are individuals to whom to pass shares. Additionally, any contracts entered into by the company persist through the changes of corporate officers, allowing the business to exist without reforming or reexecuting agreements.

DISADANTAGES OF PUBLIC LIMITED COMPANY High Costs A PLC is normally a complex thing to start. The firm must hire an investment bank and a securities lawyer. The banker (or "underwriter") then offers the initial shares to the public (and keeps a substantial commission). Often, the costs of setting up a public firm and Initial Public Offering (IPO) can run into hundreds of thousands of dollars. Public Book The term "public" here is to be taken literally. Once a firm goes public, the firm is open to public inspection. The financial books and records of the firm are open to anyone, allowing the competition to see precisely how much profit or loss the firm is experiencing. Greedy Shareholders Those who buy shares have no particular interest in the firm except in that it makes a quick buck. Most companies however, have an interest in laying out a long-term growth plan that takes patience and planning. It is not often many shareholders see it this way. Takeovers

Since the company is now "public," anyone can buy up shares, and there is no limit as to how many shares one can buy. Under certain circumstances, hostile investors might buy up a large amount of stock, giving them a strong voice on the board of directors. In this case, a firm that was built up by one group (or person) can now be taken over by others since the firm has gone public. Power Going "public" means a certain lack of control by the founders of the firm. In some cases, the firm can be controlled by a board of directors who do not necessarily have the time for hands-on business management. Therefore, ownership can be separated from control. If this is the case, then those who control the business do not own it, and do not see profit. This is not an incentive (necessarily) to rational management. Decisions If the company is public, it must have a board of directors representing the main and most powerful stockholders. This means, in turn, that major decisions must go through the board, with debates and voting. In reality, this entails that decisions will be slow and often painful. Sometimes, they might not be made at all.

Different between a Private Limited Company and a Public Limited Company The following are the main points of distinction between a private limited company and a public limited company : 1. Minimum number of members The minimum number of members to constituted a private company is two but a public company cannot be formed unless there are at least seven members. 2. Maximum number of members The maximum number of members in case of a private company is fifty but there is no maximum limit of members for a public company. It can have members equal to the number of shares issued by it. 3. Issue of Prospectus A private company cannot invite public to subscribe to its shares or debentures by issue of prospectus for inviting public to subscribe to its shares or debentures. Membership of a private company is restricted to friends because it cannot invite public to subscribe to its shares while a public company invites the public. 4. Transfer of shares

The transfers of shares is generally restricted by the articles of association of a private company. But the shares of a public company are freely transferable to subscribe to its shares. 5. Commencement of business A private company can allot shares and commence business after getting the certificate of incorporation from the Registrar of Companies. But a public limited company cannot allot shares unless it has collected minimum subscription and has received at least 5 % of the nominal amount of shares applied in cash on application. It can commence business only after getting the certificate of commencement of businesses. As per recent guidelines issued by Central Government, the minimum subscription in case of public or right issue of shares or debentures, has been fixed at 90 % of the entire issue. Such subscription must be raised within 90 days of the close of issue. 6. Number of directors A private limited company must have at least two directors whereas a public limited company is required to have at least three directors. 7. Quorum for meetings The quorum for a meeting of a private company is two while five members constitute a quorum in case of a public company. 8. Use of the word 'Limited' In case of a private company, the word 'Private Limited' must be used at the end of the name of a company. But the word 'Limited' is used at the end of the name of public company. 9. Legal formalities A private limited company is required to observe a less number of legal formalities as compared to a public company. For example, a private company is not required to call a statutory meeting and to file a statutory report to the Registrar of Companies. A private company need nit send the list of directors, a director's consent to act as such, a director's contract to take up qualification shares etc, to the Registrar of Companies. 10. Restriction regarding managerial remuneration Public limited companies cannot pay managerial remuneration in any financial year more than 11 % of the net profits of the company for that financial year. But no such restrictions applies in case of a private limited company.

Why Would a Private Company Go Public

When a company goes public, it involves selling stock to a large number of investors. While this type of transaction is not in the best interests of every company, it can be beneficial for many companies. There are a few reasons that a company may consider going public instead of remaining a private entity. Raise Capital One of the primary reasons that most companies go public is so that they can raise a substantial amount of money. When a company wants to expand its business operations, one of the most effective ways to do so is to go public. Within a very short period of time, the company could raise millions of dollars from investors who want to buy stock. The company can then use the money as it sees fit with no restrictions involved. Avoid Borrowing Another alternative that many companies turn to is borrowing the money they need. The company could borrow the money they require from a bank or from private lenders. One of the issues with borrowing the money is that you have to go through the application and approval process. Another problem with borrowing the money is that you have to pay it back. When you go public, the money that you raise does not have to be paid back according to specific terms as a loan would. Publicity Another benefit that comes with going public is the publicity that comes with it. When a company goes public, it will get a great deal of attention in the market. Analysts will provide their opinions on the company and investors will become aware of it. This helps drive up the price of the stock in some cases, and it can also help the company attract high-quality talent. The exposure that is gained through a public offering is generally more than a company could get through a marketing campaign. Retain Control One of the major benefits of facilitating a public offering is that it allows the decision makers of the company to maintain a certain amount of control in the business. By comparison, if a company offers shares to private equity investors, they will usually lose decision making power. Many venture capitalists want a certain amount of control in companies they invest in. By going public, a company can keep enough stock to have decision making power if it wants to. SOLE TRADER What Is a Sole Trader Business?

A sole trader business is more commonly known as a sole proprietorship. In other words, it is a business fully-owned and operated by one person. Sole traders include freelance workers, hair dressers, plumbers and other tradespeople or type of worker who works for himself, not for a company.

Sole Proprietorship A sole proprietor business is not incorporated and is owned by just one person. If two people own a single business, it would be a partnership, not a sole proprietorship. Under the law, the government makes no distinction between the person who owns the business and the business itself. This means the owner is fully responsible and liable for all tax and legal consequences of his business.

Starting a Sole Trader Business Incorporating a business can be complicated and costly. Setting up sole trader business, on the other hand, is as simple as just starting to do business on your own. For example, if you are a hair dresser by trade, you automatically become a sole proprietor when you set up shop and begin cutting people's hair.

Characteristics of a Sole Trader A sole trader is a business entity owned by one person. A sole trader is the name given to a business which is owned and run entirely by only one person. This type of business is typically considered to be most effective for very small businesses, contractors and freelancers. It is chosen as a business structure as opposed to the other options of a partnership or of setting up a limited company. Liability Sole traders are held liable for the financial and legal status of the business. That means that any debts or legal responsibilities of the business are immediately and completely transferred to the individual. This highlights one of the disadvantages of a sole trader set-up which is the risk of individual bankruptcy. Ownership On the other side of the coin, the individual owner of the business has relatively unrestricted access to the operating profits. That individual has complete authority to make decisions on behalf of the business. In every other kind of business no one person has this kind of individual authority. Additionally, subject to taxation, all assets of the business are de facto the property of the individual.

Trading Name Sole traders may choose to either trade under their real birth name, or under a business trading name. This means that a sole trader business may have whatever name is chosen to represent it, subject to trademarks and other legality. Administration Sole traders are completely responsible for their own business records, accounts and tax returns. Typically a record of all purchase and sales receipts must be kept in

organized condition, as well as a balance sheet listing the transactions. A tax return must be filed by the business owner once a year. It is not unusual for sole traders to hire third party accountants to process their figures.

Simplicity Compared to other business entities, sole traders are relatively simple to set-up because they are subject to less regulation than other business types. Typically there are few or no costs involved in establishing a sole trader business. They are also easier to discontinue. Because of this they may be more appealing to individuals who are starting out in the business world with their first venture.

Funding Due to the fact that a sole trader's financial liability comes entirely down to one person, they can find it more difficult to attract investment or obtain bank loans. Sole traders are considered a riskier investment than other types of businesses. Typically individuals running a sole trader type business will either be entirely selffinanced or will receive their initial funding from friends and family

Advantages of a Sole Trader There are a number of advantages that a business owner will gain by operating as a sole trader, such as the ability to control every aspect of the business. Operating as a sole trader is the easiest and most common way to set up a business. Because the law makes no distinction between a sole trader business and the owner, this type of business arrangement provides two distinct benefits. First, it allows the owner to avoid double taxation. Corporations pay separate taxes, thus an owner of a corporation must pay taxes on personal income and also on corporate income. This is not true for a sole trader. Second, a sole proprietor can deduct business expenses and losses from his personal income tax.

Formation o One of the biggest reasons business owners choose to operate as a sole trader is because it is relatively inexpensive to start. Sole traders do not have to file formation documents or pay expensive fees to begin the company. A sole trader business begins automatically when a single business owner decides to go into business. This allows a sole trader business to begin much faster in comparison to limited companies and incorporated businesses. Taxes advantage of operating as a sole trader is that unlike corporations, there is only one layer of taxation. Sole traders are not required to file a tax return as a business. Instead, sole traders are allowed to pass profits and losses from the business directly to their personal income tax return. Since this is the case, sole traders may use losses

from the business to offset income gained from other sources such as stock dividends received or interest earned on a bank account.

Control A major benefit of operating as a sole trader is the ability to exert full control over the business. Sole traders do not have to make decisions with others, since there are no other owners to vote on business decisions. This allows sole traders to react faster to changes in the business environment when compared with partnerships and incorporated business entities. Furthermore, sole traders do not have to observe the formalities that are required of incorporated businesses, which allows the owner to focus his time on improving the company as opposed to voting on key decisions. Profits Sole traders benefit from controlling the company's profits and allocating resources in any legal manner. There are no other partners or owners to split the company's profits. A sole trader is not required to separate the company's money from the personal funds of the business owner. This allows a sole trader to take money from the company at any time to meet personal obligations. In addition, sole traders are not required to share financial information with anyone.

DISADVANTAGES OF A SOLE TRADER A corporation creates a legal wall of separation between its owner and the business. A sole trader doesn't have this separation, and as a result is responsible for any business liabilities incurred by her business. If a sole trader business is sued, the court can go after her personal assets, even if they are unrelated to the business. In addition, while a sole trader avoids double taxation, the total amount of taxes she pays can potentially be higher as personal income tax can be charged at a higher overall rate. Liability The main disadvantage to being a sole trader is the liability that the business owner yields. Being held responsible for any lawsuits or potential damages is not only dangerous to the sole traders business, but it can be detrimental to her personal life as well. Unlike modern business corporationssuch as LLCswhich allow the business to be a separate entity, preventing anyone from holding your personal assets responsible for your business, sole traders are personally responsible for their business. Responsibility One of the main disadvantages to many people for running a sole proprietorship is the complete responsibility that the sole trader has. Completely variant from business to business, since each business has its own type of operations, sharing responsibility takes a huge burden off of most business owners. That is one reason for the popularity of Limited Liability Corporations, Limited Liability Partnerships, and partnerships. These businesses each allow some owners to share or take less

responsibility, leaving them to grow and improve their businesses more thoroughly than if they did not have complete responsibility.

Lack of Investors When it comes to being a sole trader, the business owner can have a difficult time for growing. Not only because of the lack of time that she has because of her tremendous responsibility, but due to investors' lack of interest in a sole proprietorship. Companies are more apt to invest in corporations that have the potential to expand. They also prefer the other benefits of corporations, such as their legal structure and lack of personal accountability. Lack of investors can mean lack of growth for many companies---which can leave many sole traders running a stagnant business. Lack of continuity Once the owner passes away, that the end of the business