1. Discuss the three major forms of business organizations?

Sole proprietorship: This is a form of business organization that is

owned by one person (Sole trader). The benefits of this type of
business are that it is the easiest to start and the least regulated of
them all. The owner also gets to keep all the profits. The drawbacks are
that the owner has unlimited liability for debts, the life of the business
is limited to the life of the owner and the funds are also limited to the
owners capital.
Partnership: A partnership is similar to the sole proprietorship except
that there are two or more partners. There are two types of liabilities,
general and limited. General is when are the partners share gains or
losses and limited is when one or more partners will run the business
and have unlimited liability and the others are silent partners. The
ways that the partnership gains and losses are divided are described in
the partnership agreement. The merits and demerits are similar to
those of sole proprietorship.
Corporation: This is the most important form (in size terms) of business
organization in most developed countries. A corporation is a legal
person that is separate and distinct from its owners; it can sue and
be sued. It can also borrow money, enter into contracts and own
properties. The advantages of these types of organizations are that
they have limited liability, unlimited life, transfer of ownership is easy
and raising capital is also easy. The major disadvantage of it is that it
must pay taxes as its a legal person. This leads to double taxation.
The corporations have many variations theyre often also called joint
stock company, public limited company or limited liability companies.

2. Discuss the importance of banks in present day?

Banks accept deposits and make loans and derive a profit from the
difference in the interest rates paid and charged to depositors and
borrowers respectively. Banks are vital institutions in any society as
they significantly contribute to the development of an economy
through facilitation of business. The benefits of banks are:

Credit provision it increases economic activity as it allows

businesses to invest more capital than what they have, households to
purchase expensive items without saving for it in advance (houses,
cars, etc.)
Liquidity provision All corporations and households need a specific
security against unexpected need for cash, banks are the major
liquidity providers. Banks, typically speaking, take in deposits from
customers and in turn loan these deposits back out buy creating loans
backed by collateral.
Capital Formation capital is one of the most important part of any
business or industry. It is the life blood of business. Banks increase
their capital formation by collecting deposits from depositors and
converting these deposits into loan advances for various sectors.
Remittance of Money Banks help in easily transferring cash from one
country to another. It helps in enabling transactions in distant places.
The instruments that help for the same are cheques and credit cards.
Rapid Economic Development Banks provide loans for various
sectors such as agriculture, industry and trade. They also provide
employment opportunities and lead to capital formation, hence leading
to rapid economic development.
Promotion of Entrepreneurship the role of private sector is crucial in
accelerating the pace of economic growth. The banks increase the
involvement of the businessmen by making available the loans on

practical interest rates. This leads to more people borrowing and

starting up their own businesses, thereby promoting entrepreneurship.