Types of Business Organizations - Essay Example

Download file to see previous pages Partners bring in the decided capital to the business and can even bring more than the agreed share. Any partner can go out through a defined process and even a new partner can be admitted to an existing partnership. Partners are fully liable for any debt due in the name of the firm.
Benefits
- Freedom of entry and exit
- Capital and ideas
Drawbacks
- Full liability
- Limitation on number of members

LIMITED COMPANY
A company is a legal entity having the status of an individual. This means that a company can sue and can be sued in its own name. A “private limited company” is for a small business setup but the entrepreneur may offer some of the shares to the investors in return for capital while retaining the major shareholding. Only a “public limited company” can offer its shares to the general public through the stock exchange.
The shareholders' liability is limited to the sum of the capital invested by each shareholder.

Benefits
- Limited liability of shareholders
- Offering of shares to investors for capital
Drawbacks
- Typical formation process

BUDGETING FACTORS
To start up a new business, some plans and budgeting factors must be taken into consideration to avoid the failure of the business in Its beginning only. These are :
- To conduct a thorough market research
- Analyze the strength of the market competition
- To secure adequate finance
- Avoid inaccurate estimation while constructing budgets
A well-designed business plan focuses on various factors including budgets. It figures out all the expected costs and revenues that are expected to be incurred and generated respectively. All the planning about how the business is to be carried out, how the sales are to be made and how the funds are to be raised to meet up the expected costs, all are laid down in that plan sheet.
While making a budget, Tim O'Neill must have kept in mind how much money is needed and for what purposes. Assumptions should also be considered for some variable factors like interest rates, the volume of sales and the cost of goods.

Cash flow is another important factor to be considered so that one can foresee if the business’ income will cover its expenditure. It is very rare that a business starts earning profit from its maiden year only. Difficulties do arise to establish a business and goodwill.
SOURCES OF FINANCE
Any business that needs to be set up requires a large amount of finance to arrange premises, equipment, stock and other essential items. After bringing in the capital by the owners, partners, or shareholders, the owners of the business seek different sources to obtain finance to meet their day-to-day expenses and payment of bills. Some sources are given below:
An Overdraft
This service enables the account holder to go beyond its available funds up to a certain limit while spending. A business can make immediate payments to its bills by using this service. This overdraft is repaid when sufficient funds are deposited back into the account. A comparatively higher rate of interest is charged by the bank on this overdraft.
A Business Credit Card

A business can borrow funds through this card for shorter periods with strict conditions by the bank. If the repayment is delayed, then a high rate of interest is imposed on the amount.
A Bank Loan
A bank loan is obtained for longer periods and for huge amounts for expansion or set-ups. The repayment arrangement is made fixed in installments and in equal intervals.
Mortgage
This loan is obtained against some property as a security to obtain large items like buildings, vehicles, machinery, etc. ...Download file to see next pages Read More