Understanding Business 11th Edition Chapter 4

Understanding-Business-
11th-Edition-Chapter-4
FUNCTIONS OF BUSINESS
to preserved knowledge
to serves the needs of customers
to provide career
to help country development
to growth of economy
to serves society
SOLE PROPRIETORSHIP
CHARACTERISTICS
simplest form of business ownership
owned by one person
does not need to be operated by one
person solely instead it can have
large number of employees
usually in small size
largest number of business in most
countries
DISADVANTAGES
entirely responsible for debts and risk
unlimited personal liability
limited access of capital
limited skills and capabilities
feeling of isolation
ADVANTAGES
total independent in making decisions
sole ownership of profits
pay only personal income tax and not
business tax
low setup costs
short life of business
FORMS OF BUSINESS OWNERSHIP
SOLE PROPRIETORSHIP
CHARACTERISTICS
simplest form of business ownership
owned by one person
does not need to be operated by one
person solely instead it can have
large number of employees
usually in small size
largest number of business in most
countries
DISADVANTAGES
entirely responsible for debts and risk
unlimited personal liability
limited access of capital
limited skills and capabilities
feeling of isolation
ADVANTAGES
total independent in making decisions
sole ownership of profits
pay only personal income tax and not
business tax
low setup costs
short life of business
PARTNERSHIP
DEFINITION
an association of two or more persons
to act as coowners of a business for
a profit
TYPES OF PARTNERSHIP
GENERAL PARTNERSHIP
responsible for the business operation
and receive a salary
each partner can enter into contracts
on behalf of all the others
share the profits and losses of the
business
if one partner withdraws, he has to
give notice to creditors, customers
and suppliers in order to avoid future
liability
responsible for the debts of the
enterprise
a general partner would take an
active role in managing business
they can lose the capital but they are
not required to pay partnership debts
partners are not legally liable for
debts beyond the amount they
invested
LIMITED PARTNERSHIP
not liable for the partnership debts
their personal properties will not be
affected to cover the partnership's
unpaid liabilities
share the profit and loss of the firm
their liability for the debts of
partnership is limited to the capital
they have put in
easy and low setup costs
may or may not participate in
managing the business
ADVANTAGES
able to raise more capital
tax advantages
combined business skills and knowledge
retention of profits
losses are shared
DISADVANTAGES
lack of continuity
difficulty in raising large sum of
capital
bound by the act of one partner
at least one partner has unlimited
liability
CORPORATION
DEFINITION
most complex form of business
a legal entity separate from its
constituent members
formed by several persons who are
able to own property, draw contracts
and employ people
TYPES OF CORPORATIONS
UNDER THE CORPORATION
ACT 1965
LIMITED BY SHARES
member's personal liabilities are
limited to the par value of their
shares
it can be
PRIVATE LIMITED
the company cannot sell shares to the
general public
denoted by the words 'Sendirian
Berhad' or abbreviated to 'Sdn Bhd'
PUBLIC LIMITED
it raise capital by selling shares
run by Board of Directors elected by
shareholders
must have the word 'Berhad', often
abbreviated to 'Bhd'
LIMITED BY GUARANTEE
member's liability is limited based on a
certain amount that has been agreed
by its members as stipulated in the
'Memorandum of Association' in the
event company goes bankrupt
not used for commercial undertakings
instead for trade associations,
charitable bodies and professional
bodies
if any profits are made, it will not be
distributed to its members it will
be reinvested to achieve its goal and
not solely for making profit
UNLIMITED CORPORATION
members would have unlimited liability
not often used for many business
undertaking
ADVANTAGES
limited liability
easy to raise capital through sale of
shares
able to transfer ownership
relative permanence of existence
increase expertise and skills
able to delegate authority
DISADVANTAGES
activities limited by law
costly incorporation process
high taxation
loss of control by the founder
extensive governmental regulations
and reports required
BUSINESS GOALS
DEFINITION OF GOALS
an objective that a business hopes and
plans to achieve
PURPOSE OF GOAL SETTING
to assist in the allocation of
resources
3. OBJECTIVE: specific statements
that explain in detail on how to
accomplish the mission
to define the corporate culture
2. MISSION: indicates the way how a
business will achieve its purposes
TYPES OF GOALS
formulated by the higher level
management group in a business
organization
LEVELS OF GOALS
LONGTERM GOALS
set for a long period of time (5 years
and above)
INTERMEDIATE GOALS
set by middle managers of a business
set for period 15 years
SHORTTERM GOALS
set by first line managers
set for 1 year and less
helps managers to assess the business
performance
ROLES OF BUSINESS
provide goods and services
provide employment
helping the country to increase the
growth rate
helping to protect the environment
BUSINESS SUPPORT SYSTEM
TYPES OF BUSINESS SUPPORT SYSTEM
TECHNICAL ASSISTANCE
assist entrepreneur in improving their
production methods and developing
systematic management process
FINANCIAL ASSISTANCE
financial facilities or accommodation is
provided by financial institution for
an entrepreneur to start and
perform a business
MARKETING ASSISTANCE
provide assistance to entrepreneur in
distributing and marketing their
products in domestic and foreign
markets
INFRASTRUCTURE ASSISTANCE
INFORMATION PROVIDERS
information assistance is offered to
an entrepreneur in the form of
business opportunities, statistic
discovery, research and development
and technological development
RESEARCH AND DEVELOPMENT
research and analysis include project
possibilities, marketing research and
research on technology
training provided to entrepreneur to
help them possess the right skills in
managing their business
TRAINING, SEMINAR AND WORKSHOP
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