Forms of Organization

In business there are many legal forms of organization. The form of organization means the type of ownership. The main differences between the types of ownership are in their ability to raise capital, the size and continuity of the enterprise, the disposition of profits, and the legal obligations in the event of bankruptcy. Each form has certain advantages and disadvantages. The three forms popular in business are the sole proprietorship, the partnership, and the corporation.

The form that requires the least amount of capital and personnel is the sole proprietorship, where the proprietor is the owner. It is the simplest way of starting a business. This sole proprietor can start a business by simply purchasing the necessary goods and equipment and opening up a shop. There are very few government and legal regulations to comply with. The sole trader (self-employed and entirely responsible for all aspects of his business) owns all the business assets, makes all the decisions, takes all the risks, and keeps all the profits of the business. The business itself pays no tax, but the owner must pay personal income taxes on his profits. If a sole proprietor is successful, he takes a lot of personal satisfaction in his enterprise. If he is not or wishes to close his business and start a new one, he simply has to sell his inventory and equipment, pay his bills, close up shop, and begin a new activity. The sole trader has the opportunity to be successful, but he also runs the risk of financial ruin; owns all the assets of the business, but he also has to supply all the capital, and his ability to borrow is limited to his personal amount of money and wealth. The owner enjoys his freedom to make decisions about his business, but he alone takes the responsibility for incorrect choices. He has the right to keep all the profits of the business. However, if he suffers a loss, he still owes all the debts, and his legal liability to pay them may be more than his investment in the business. He must use his personal properly to settle the debts of the business if he goes bankrupt.

A partnership consists of two or more people who share the ownership of a business. A partnership should begin with a legal agreement covering various aspects of the business. Two important items that need to be covered are exactly which assets each partner is contributing, as well as how the partnership can be changed or terminated. This agreement is called the articles of co-partnership. It is not as complicated as the articles of incorporation. However, the articles of co-partnership indicate that the initiation of a partnership is not as easy as the beginning of a sole proprietorship. Partners own all the assets, owe all the debts, make the

decisions, and share the profits and losses. They pay only personal income taxes on their share of the profits. If each partner has a different expertise in an important business area, the partnership has an advantage over the sole proprietorship in the managerial ability. A partnership usually has more capital than a sole proprietorship. In a partnership the personal wealth of all the partners can be used to secure loans and credit. This personal wealth may also be used to settle the debts of the business. Like the sole proprietorship, the partnership has unlimited financial liability in the event of bankruptcy. Unlike the sole proprietorship where one owner-manager makes all the decisions, the smooth operation of a partnership requires both owners to agree on the management policy. If a partnership wished to cease doing business, the owners would have to agree on how to dissolve it.

The corporation is very different from both sole proprietorship and partnership. First of all, the corporation is a legal entity, which is chartered by the state in which it is incorporated under the laws of the State (US). As a legal entity, the corporation can own property that is not the personal wealth of its owners. It also can enter into business agreements on its own. Forming a corporation is not easy. There are many legal procedures to follow. The ownership of the corporation is divided into shares of stock. One stockholder or shareowner can buy, sell, and trade his shares without permission from the other owners. A corporation can raise large amounts of capital by selling shares of stock. The stock owners vote for a board of directors who hire a president or chief executive officer to run the company. The board of directors also decides what to do with the corporation's profits. It usually retains part of the profits for reinvestment in the company and distributes the other part to the shareholders as dividends. Unlike the sole proprietorship and the partnership, the liability of a corporation is limited to the value of the assets of the company. The personal wealth of the stockholders cannot be used to pay debts in case of bankruptcy. Corporations do not operate like other forms of business because the ownership can be easily transferred through stock sales. There are favorable and unfavorable points to consider with regard to the corporate form of ownership. The corporation has access to large amounts of capital and has limited liability, but its activities are closely monitored by government agencies. A large corporation has a lot of managers who can specialize in different aspects of the business. However, the corporation must have good organization for efficient operation. Another important disadvantage of the corporation is that its profits are taxed twice. The profits are taxed once as corporate profits, and then the individual stockholders pay personal income taxes on their dividends.

Each company is structured in a special way. Most business organizations have a hierarchy with one person or a group of people at the top, and an increasing number of people below them at each successive level and a clear line of command. There may also be staff positions holders of which have no line authority and are not integrated into the hierarchy. The organization might also be divided into functional departments, such as production, finance, marketing, sales and personnel. This means, for example, that the production and marketing departments cannot take financial decisions without consulting the finance department.

Larger organizations are often further divided into autonomous divisions, each with its own functional sections. Functional organization is efficient, but there are two standard criticisms. Firstly, people are usually more concerned with the success of their department than that of the company, so there are permanent battles between, for example, finance and marketing, or marketing and production, which have incompatible goals. Secondly, separating functions is unlikely to encourage innovation. More recent organizational systems include matrix management and teams, both of which combine people from different functions and keep decision-making at lower levels. An inherent problem of hierarchies is that people at lower levels are unable to make important decisions, but have to pass on responsibility to their boss. One solution to this is matrix management, in which people report to more than one superior. For example, a product manager with an idea might be able to deal directly with managers responsible for a certain market segment and for a geographical region, as well as the managers responsible for the traditional functions of finance, sales and production. A further possibility is to have wholly autonomous, temporary groups or teams that are responsible for an entire project, and are split up as soon as it is successfully completed. Team-working is often not very good for decision-making, and they run the risk of relational problems, unless they are small and have a lot of self-discipline. In fact they still require a definite leader, on whom their success probably depends.

The experience of many organizations proves that in a thriving company hierarchy must be out. Apart such innovative management methods as team-working, described above, many companies also implement flexibility. In case of flexible working personnel practices hot-desking and only need to come into the office occasionally. Another type of flexibility is flextime, where employees develop a schedule suitable to them within certain limits. Using such innovative working practices the management can motivate the staff and avoid organizational problems.

1 Find equivalents to the following words and learn them:

гибкость/ автономный/ эффективный/ неограниченная финансовая ответственность/обязательство/ собственность/ единоличное владение/ подчиняться предписаниям/ лицензированный/ зарегистрированный как корпорация/ следить/ иерархия/ состояние/ нести риск финансового разорения / быть должным / матричная система управления

2 Explain the following words: hot-desking, matrix management, team-working, hierarchy.

3 Answer the following questions

What are the three major forms of organization?

What are their advantages and disadvantages?

How can companies be organized?

What is the most efficient form of company structure?

Up to you…

Read the following cases and identify what questions should you answer before forming a partnership?

1) A two- woman partnership is assesses for a tax liability of 2000 pounds. Partner A pays her half of the liability (1000) on time. Partner B then defaults on her share, and disappears to South America with her new toy boy. Partner A becomes liable for B’s share as well as the money she has already paid.

2) This example is based on true circumstances wherein two partners running a private club got into debt. The bailiffs entered the premises, removed all assets and closed it down. Partner X had a heart attack and died, so partner Y declared himself voluntarily bankrupt, leaving the widow of partner X having to pay all business debts.

Links

BPR principles are discussed at this page:

http://prosci.com/factors.htm

http://policycenter.cunyit.edu

Unit 9 Money

Money

Throughout history, many things have served as money; American Indians used beads made of pol­ished shells strung together. Other cultures have used salt, cattle, chickens, shells, rocks, coconuts, and precious metals such as gold. Americans use fiat money — money that is not backed by gold but is instead backed by a government promise that it is legally acceptable as a means of exchange for products. Fiat money usually takes the form of currency— metallic coins and paper money (bank notes or bills)— and is found in all countries that have a central government.

No matter what a particular culture uses for money, money itself has three general functions. It serves as a medium of exchange, as a measure of value, and as a store of value.

As a medium of exchange, money facilitates the buying and selling of goods and services and eliminates the need for bartering.

As a measure of value, money serves as a yardstick of the value of all goods and services. For example, 51 will buy a dozen large eggs, 512,000 will buy a good quality automobile, and 90,000 will buy an average-priced home in the United States.

As a store of value, money acts as a way to maintain the value of accumulated wealth until it is needed to purchase goods or services.

In order to be used as a medium of exchange, money must be acceptable, divisible, durable, portable, stable in value, and dif­ficult to counterfeit. All money has these characteristics.

Acceptability is probably the most important characteristic of money. Money must be readily acceptable as payment for goods and services and for the settlement of debts. People must believe in and trust the value of what they use as money.

Divisibility. Money must be easily divisible into small units of value in order to facilitate exchanges. If money is to be a measure of value, all items must be valued on a common basis, with a visible unit of money serving as the medium of exchange. Coins today аre primarily used to provide divisibility.

Portability. It must be possible to carry money easily for it to function as a medium of exchange. Large, colored rocks could serve as money, but one would need a wheelbarrow to transport them. Paper currency- is popular throughout the world because it is lightweight and can be carried in large quantities. Paper money was first used in North America in 1685.

Durability. Money must be durable. Because of continuous use, money must be able to retain its original qualities over a long period of time and through

much handling. Metal coins, then, would seem to be the ideal form of money. Paper currency, however, is far more portable because of its light weight.

Stability, Money must be stable and maintain its declared face value. Stability allows people who wish to postpone purchases to do so without fear that their money will decline in value. Money declines in value during periods of inflation, when economic conditions cause prices to rise steadily and thereby reduce the purchasing power of a legal tender. Instability destroys confidence in a nation's money, and ultimately the money loses the characteristic of acceptability. Instead of using money that is declining in value, people store their savings in land, gold, or some other physical asset.

Difficult to Counterfeit. Money must be difficult to counterfeit, or duplicate illegally. People will lose confidence in and stop using a currency if it can be counterfeited easily.

Every country takes some steps to make counterfeiting difficult. Some countries use highly colored money; others use specially watermarked paper that is difficult to duplicate. The United States uses special paper containing silk threads. The Bureau of Engraving and Printing will soon begin to use a metallic filament that can be seen with the human eye but cannot currently be reproduced.

1Find English equivalents to the following words:

номинальная стоимость/ бумажные деньги, не обеспеченные золотом/ инфляция /средство обмена / мера стоимости/ средство накопления/ монеты/ снижаться в стоимости

2 Answer the following questions:

What are the major functions of money?

What are the major characteristics of money?

What modern instruments to protect money from counterfeiting do you know?

Up to you…

Portability is an essential characteristic of money, but few people travel with large amounts of money about them. Think about the ways people invent to avoid carrying cash when traveling.

Links

These pages contain tips for getting loans:

Businesstown.com/planning/creating-bank.asp

www.bankers.com/pf_loantips.htm

Дата добавления: 2015-11-14