Гура В.Ю.

Научный руководитель: Усиков В.А.

Донецкий национальный университет экономики и торговли им. М. Туган-Барановского

BUSINESS ORGANIZATION

Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit or state-owned. A business owned by multiple individuals may be referred to as a company, although that term also has a more precise meaning.

First of all, thinking and rethinking your business organization structure is just as important for existing businesses as it is for new ones. Even if you already have a business with a working structure, there is always room to review and refine. To create an effective business organization structure, you need to consider:

1. Your Competitors

Though you may not have direct access to your competitors’ plans and strategies, you can make an educated guess about their structure. Look at their reporting line structures, and procurement, production, marketing, and management systems. If you have the financial capability, consider commissioning a market research agency to study the business organization structure of your main competitors. You can also visit your competitors’ websites to see if they have published their structures.

2. Your Industry

What is the standard in your industry, if any? Some types of businesses lend to certain business organization structures, while other types can be set up with more flexibility. For example, automobile manufacturers usually set up regionally. Their head office will have the responsibility of setting global goals and standards, but each regional unit operates as an independent entity. On the other hand, a department store or supermarket chain may also set up regionally, but they might also set up by department or by product.

3. Compliance or Legal Requirements

Some industries are regulated, and as such require certain elements to be incorporated into their business organization structure. In fact, even industries which aren’t regulated may need to comply if they employ a certain number of employees. And of course, every business needs to ensure salaries, wages and benefits are paid, and all remittances are made, such as withholding taxes, social insurance and 401K.

4. Your Goals

What goals do you have for your business, and what kind of leader do you intend to be? Your organization structure should enable you to achieve your business goals, and how each person within your structure plays an important role. In this respect, you should also make clear the reporting lines between each level.

5. Investors and Lending Sources

Having a business organization structure lets potential investors and funding institutions know how you will organize your business operations. But it also lets them know what obligations you, your shareholders or partners have and how each of you will interact. An organizational structure also lets investors and lenders know what kind of talent you need to employ to effectively manage and operate the business, how soon you need them, and how you will find and attract them. Your business plan should outline the key positions in your organization and detail the responsibilities and experience required for each. If you have already have prospects or have made commitments for any of these positions, you should also provide a brief profile for each.

Business is a commercial enterprise performing all those functions that govern the production, distribution, and sale of goods and services for the benefit of the buyer and the profit of the seller. The existing forms of business organization enable various branches of industry to adapt to changing conditions and to function more efficiently and profitably. The main three forms of business ownership are sole proprietorship, a partnership, and a corporation. Sole proprietorship is ownership of a business by a single person. The sole proprietor provides capital to run the business and makes all the decisions. He or she employs other people and is responsible for the success and for the failure of the business. It is the simplest and the oldest form of business ownership.

Advantages:

It is relatively easy to start this type of business. The owner has an incentive to run the firm efficiently as all the profits are his/hers. It is a flexible type of business as the owner can quickly respond to changes in the market conditions.

Disadvantages:

Unlimited liability – in case of bankruptcy the owner may lose all his property including his personal assets including a house or flat, a car, etc. that can be sold to settle the debts of the business. A single owner is seldom able to invest as much capital as a partnership or a corporation can obtain. Unless the owner has much personal wealth, the business may have difficulty borrowing money in critical times. A sole proprietor may also have difficulty hiring and keeping good employees because the business will dissolve when the owner retires or dies. The owner faces all the risks, and alone bears all the responsibility for the business. In many countries this type prevails in such sectors as farming, retailing, repair and maintenance work, personal services. But in terms of total employment, capital and output this type is relatively unimportant.

A partnership is an association of two or more persons who have agreed to combine their financial assets, labour, property, and other resources as well as their abilities and who carry on a business jointly for the purpose of profit. The agreement the partners usually sign to form an association is known as a partnership contract and may include general policies, distribution of profits, responsibilities, etc.

Advantages are similar to those of sole proprietorship: it is easy to establish a partnership, and this is also a flexible form of business. It is usually easier for partnerships to obtain additional financing because the personal assets of the group are usually larger and the chances of success are higher.

Disadvantages: Unlimited liability of each partner for the debts of the business, i.e. complete financial responsibility for losses. Partners who wish to retire may find it difficult to recover their investments without dissolving the partnership and ending the business. Partnerships dominate in such professions as law, accountancy, medical services, real estate business and so on.

A business corporation is an organization created by law that allows people to associate together for the purpose of profit making. Corporations are also known as joint-stock companies because they are jointly owned by different persons who receive shares of stock in exchange for an investment of money in the company. Shares represent fractions of the company’s assets such as cash, equipment, real estate, manufactured goods, etc.

Though the corporation is more difficult and expensive to organise than other business forms, it has a number of advantages. Most business people form limited companies. In this case shareholders have the liability only for the amount of money they have invested. If the company goes bankrupt, their personal possessions are not in danger, i.e. they cannot be sold to pay the debts of the company. Most companies begin as private limited companies as the founders invest their private capital. Successful, growing companies apply to one of the Stock Exchanges to become a public limited company.

You can incorporate a business yourself, or you can hire a professional incorporation service. Fees for a professional firm can run from $300 to over $1,000. You may also need the services of an attorney. State governments charge filing fees for processing your incorporation documents. Fees vary by state and can vary by the type of organization you want to form. You will need to file a Doing Business As form with your county government to register your business name, and this requires a filing fee and newspaper costs for announcing your business name to the public. These fees can quickly add up, so have solid reasons for incorporating, and understand how your form of organization will achieve your business, legal, and tax needs.