Introduction to Business O&M

What?
Business Commerce Trade Profession

Business
A commercial or industrial enterprise and the people who constitute it; The activity of providing goods and services involving financial and commercial and industrial aspects

Commerce
Transactions (sales and purchases) having the objective of supplying commodities (goods and services)

Trade
Barter: An equal exchange Exchange or give (something) in exchange for Exchange (buying and selling on domestic or international markets) of goods and services Deal: A particular instance of buying or selling Craft: people who perform a particular kind of skilled work; "he represented the craft of brewers"; "as they say in the trade"

Profession
The body of people in a learned occupation An occupation requiring special education

Define Business
A business (company, enterprise or firm) is a legally recognized organization designed to provide goods and/or services to consumers. A business is typically formed to earn profit that will increase the wealth of its owners and grow the business itself The owners and operators of a business have as one of their main objectives the receipt or generation of a financial return in exchange for work and acceptance of risk

Objective
A business is typically formed to earn profit that will increase the wealth of its owners and grow the business itself The owners and operators of a business have as one of their main objectives the receipt or generation of a financial return in exchange for work and acceptance of risk

Types of Business
Agriculture Mining Financial (Banking, Non Banking) Manufacturing (FMCG, CD, CG etc.) Services (Financial, IT, IPM, Entertainment, Marketing, Foods, Consulting etc.) Sales Oriented (Distribution, Retail, Franchising etc.) Real Estate (Commercial, Residential) Transportation Utilities Governmental

Basic Forms of Ownership

Sole proprietorship Partnership

Corporation
Cooperative

Forms of Ownership
Sole proprietorship: A sole proprietorship is a business owned by one person. The owner may operate on his or her own or may employ others. The owner of the business has personal liability of the debts incurred by the business.

Partnership: A partnership is a form of business in which two or more people operate for the common goal which is often making profit. In most forms of partnerships, each partner has personal liability of the debts incurred by the business. There are three typical classifications of partnerships: general partnerships, limited partnerships, and limited liability partnerships.

Forms of Ownership
Corporation: A corporation is either a limited or unlimited liability entity that has a separate legal personality from its members. A corporation can be organized for-profit or not-for-profit. A corporation is owned by multiple shareholders and is overseen by a board of directors, which hires the business's managerial staff. In addition to privately-owned corporate models, there are state-owned corporate models. Cooperative: Often referred to as a "co-op", a cooperative is a limited liability entity that can organize for-profit or not-for-profit. A cooperative differs from a corporation in that it has members, as opposed to shareholders, who share decision-making authority. Cooperatives are typically classified as either consumer cooperatives or worker cooperatives. Cooperatives are fundamental to the ideology of economic democracy.

Sole Proprietorship
Advantages Quicker Tax Preparation: As a sole proprietor, filing your taxes is generally easier than a corporation. Simply file an individual income tax return including your business losses and profits. Your individual and business income are considered the same and self-employed tax implications will apply. Lower Start-up Costs: Limited capital is a reality for many start ups and small businesses. The costs of setting up and operating a corporation involves higher set-up fees and special forms. It's also not uncommon for a lawyer to be involved in forming a corporation. Ease of Money Handling: Handling money for the business is easier than other legal business structures. No payroll set-up is required to pay yourself. To make it even easier, set up a separate bank account to keep your business funds separate and avoid co-mingling personal and business activities.

Disadvantages Personally Liable: Your small business in the form of a sole proprietorship is personally liable for all debts and actions of the company. Unlike a corporation or LLC, your business doesn't exist as a separate legal entity. All your personal wealth and assets are linked to the business. If you operate in a higher risk business such as manufacturing or consumables, the cost to benefit ratio is favourable toward a corporate structure. Lack of Financial Controls: The looser structure of a proprietorship won't require financial statements and maintaining company minutes as a corporation. The lack of accounting controls can result in the demise of your small business. No matter the legal structure of your business, take time to set up the proper financial statements for your company. Lonely at The Top: Being a business of one can be lonely. All the decisions, actions, and results rest on you. Are you able to work alone and be productive? If not bring in a partner can be necessary for your small business survival. Difficult to Raise Capital: Imagine your business in 5 years. Will it still be a business of one? Growing your small business will require cash to take advantage of new markets and more opportunities. Outside investors will take your company more serious if you are a corporation.

Partnership
Advantages You have a shared financial commitment. You can pool resources, expertise, and strengths. There are limited start up costs. There are few formalities (mostly applicable licenses).

Disadvantages Partners may have different visions or goals for the business. There may be unequal commitment in terms of time and finances. There may also be personal disputes. Partners are personally liable for business debts and liabilities. Each partner may also be liable for debts incurred, decisions made, and actions taken by the other partner or partners. At some time, there most certainly will be disagreements in management plans, operational procedures, and future vision for the business. You may encounter difficulty in attracting investors.

Pvt. Limited Company

Advantages Limited Liability Legal Entity Status Perpetual Succession Project Cost and Risk Sharing Transfer of Ownership Public / Private Borrowing Taxation

Disadvantages Elaborate setting up process Costly Several regulations and filings Greater statutory surveillance

Cooperatives
Advantages Act as 'schools of democracy' due to their democratic member control. Inclusive and open membership. Facilitate up skilling and capacity building due to their principle of 'education, training and information'. Lower economic vulnerability due to risk pooling. Greater generation of ideas and debate due to existence of multiple owners. Allow for greater input into policy dialogues due to their tendency to federate into larger bodies at national and international levels. Collective action can open up national and international markets, as seen with many examples in the fair-trade market. Lower input and distribution costs due to greater economies of scale.

Disadvantages Possibility of conflict between members; Longer decision-making process; Participation of members required for success; Extensive record keeping necessary Less incentive to invest additional capital

LLP: Limited Liability Partnership

Advantages Limited Liability Limited liability partnerships, not surprisingly, offer limited liability for partners. That means each partner is responsible only for the amount of money he has given or promised to the partnership, and each partner is not "personally liable." By limiting liability to partnership liability, the only money a person suing the partnership could win is partnership money--not a partner's personal savings. This makes limited liability partnerships more secure and less financially risky than a partnership. No Double Taxation Unlike corporations, limited liability partnerships are taxed directly through the partnership. This avoids corporate double taxation, where income from a corporation and distributed profits are both taxed. Management The ability to directly manage a partnership is a significant advantage of a limited liability partnership. In a corporation, shareholders hold stock in the company and elect a board of directors, who then make executive decisions for the company. Corporations also may have company directors doing more mundane, daily business. Limited liability partnerships avoid the unnecessary extra steps by allowing each partner to directly own or control a portion of the partnership.

LLP: Limited Liability Partnership

Disadvantages Some Personal Liability While some states restrict liability of partners in a limited liability partnership, some do not. For example, some states limit liability only for negligent civil wrongdoings but allow personal liability for intentional torts or criminal actions. Other states restrict liability, even for intentional torts--but there may be some situations where personal liability may arise. Some Restrictions Some states restrict the types of professions that may form a limited liability partnership. Traditionally, professional fields of study, such as attorneys, architects and accountants, are included. Some states limit limited liability to these traditional fields. Liable for Partner's Actions The partnership will be liable for actions taken by a partner in furtherance of the partnership. This means that financially, being a member of a limited liability partnership may be less secure than merely being a shareholder of a corporation.