KEY DEFINITIONS OF BUSINESS UNIT
Definition
Is an organization or firm that deals in the production or distribution of commodities usually for the purpose of making profit. It may be set up by an individual or group of individuals and its size depends on the amount of capital invested.
FORMS OF BUSINESS UNIT
(i) Public sector
(ii) Private sector
PUBLIC SECTOR
The public sectors comprise of business organization owned by the government. The sector consist of the following;
- Public cooperation
- Public companies
- Local government authorities
- Parastatals
PRIVATE SECTOR
The private sectors comprise of business organization owned by private individuals. The sector consist of the following;
- Sole proprietorship
- Partnership
- Private companies
- Cooperative society
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SOLE TRADER
Is a person who owns a business singly. He is the only owner of the business, he provides all the necessary capital, employs all the necessary labour and bears all the risk of the business.
Characteristics of a sole trader
- Owned by one person.
- Provides capital himself.
- Earns profit and bears loss.
- The main final authority on all affairs of the business versus liabilities or assets of the business is limited.
UN LIMITED LIABILITIES
It occurs when the business and the owner are not separated.
ESTABLISHING OF A SOLE TRADER BUSINESS
-Presence of the accepted location.
-Place should be recognized by the government policy.
Finding capital
-Money being invested to start the business.
-Submission of provision income for tax assessment (TRA) calculate according to income quarrying.
Obtain trading license
Is a document which gives power to start the business.
Starting operation
Soon after trade license has been issued the aim commencing the business.
A sole trader business is very flexible
Change the nature of the business any time without offending any body.
ADVANTAGES OF SOLE TRADER
1.Organization is very simple
He takes all the decisions no necessity to call a meeting.
2. He takes all the profit and bears the loss.
3. Contact with costumers
He is able to establish a direct contact both with his employees and any problem can be solved easily.
4. Business is very flexible
He can change the nature of the business at any time without asking for permission.
5. He enjoys top secret
He is the only person who knows the business secrets.
6. Need for small capital
The business can be established with any amount of money.
DISADVANTAGES
- Unlimited liabilities
When he enters into serious loss his personal resource is taken as security to cover bad debts.
- Capital resource is limited
Resources are small hence no expansion.
- Limitation of talent
Every person has limitation, nobody is well in every aspect that’s why there is division of labour and specialization.
- He bears the loss alone
Sole trader is the only person who owns the business therefore he suffers all loses which occur.
- Lack of continuity
Performance of sole proprietorship is always uncertain and difficult to maintain. The success of sole proprietorship depends on the personal efforts and abilities of the owner. In case the owner dies, the business is adversely affected. The business may even collapse.
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