1. Single Ownership:
Ownership when applied to an industrial enterprise means title to and possession of the assets of the enterprise, the power to determine the policies of operation, and the right to receive and dispose of the proceeds.
It is called a single ownership when an individual exercises and enjoys these rights in his own interest. A business owned by one man is called single ownership. Single ownership does well for those enterprises which require little capital and lend themselves readily to control by one person.
Examples of enterprises run by single owners are printing presses, auto repair shops, woodworking plants, small fabrication shops, etc., Le., retail trades, service industries and small engineering firms. In single ownership, one person contributes the original assets to start the business, maintains and controls business operations, reaps full benefit in terms of profit and is fully liable for all debts associated with the business.
Advantages of Single Ownership:
Easy to establish as it does not require to complete any legal formality.
Simplicity of organization.
The expenses in starting the business are minimal.
Owner is free to make all decisions.
This type of ownership is simple, easy to operate and extremely flexible.
The owner enjoys all the profits, thus,
There is a great deal of personal motivation and incentive to succeed.
Minimum legal restrictions are associated with this form of ownership.
Owner can keep secrecy as regards the raw materials used, method of manufacture, etc.
Single ownership associates with it the great ease with which the business can be discontinued.
Disadvantages of Single Ownership:
The owner is liable for all obligations and debts of the business.
The business may not be successful if the owner has limited money, lacks ability and necessary experience to run the business.
Because of the relatively unstable nature of the business, it is difficult to raise capital for expanding the business.
If the business fails, creditors can take the personal property as well as the business property of the (single) owner to settle their claims. This means single ownership involves unlimited liability for debts and losses.
There is limited opportunity for employees as regards monetary rewards (e.g., profit sharing, bonuses, etc.) and promotions.
Generally, a single ownership firm has limited life, i.e., the firm may cease to exist with the death of the proprietor. This is the cause of the unstable nature of the firm (refer 3 above).
Applications of Single Ownership:
Single ownership is suitable:
For retail trades, service concerns and small engineering firms which require relatively small capital to start with and to run.
For those businesses which do not involve high risks of failure.
When the business can be taken care of by one person.
2. Partnership:
A single owner becomes inadequate as the size of the business enterprise grows. He may not be in a position to do away with all the duties and responsibilities of the grown business. At this stage, the individual owner may wish to associate with him more persons who have either capital to invest, or possess special skill and knowledge to make the existing business still more profitable.
Such a combination of individual traders is called Partnership. Partnership may be defined as the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.
Individuals with common purposes join as partners and they put together their property, ability, skill, knowledge, etc., for the purpose of making profits. In brief, partnership is an association of two or more (up to 20) persons to carry on as co-owners of a business for profit.
Partnerships are based upon a partnership agreement which is generally reduced to writing. It should cover all areas of disagreement among the partners. It should define the authority, rights and duties of each partner. It should specify- how profits and losses will be divided among the partners, etc.
Kinds of Partners:
(i) Active Partners who take active part in the management of the business enterprise.
(ii) Sleeping Partners who do not take any active part in the conduct of the business. Both Active and Sleeping partners are responsible for the debts of the Partnership.
General Duties of Partners:
Partners should:
(i) Be just and faithful to one another.
(ii) Render true accounts and full information about everything that affects any partner.
(iii) Cooperate and accommodate each other.
(iv) Have confidence in each other and better mutual understanding.
(v) Respect the views of one-another.
Types of Partnership:
(i) General Partnership:
Whatever has been discussed above so far pertains to General Partnership; besides that in a general partnership, each partner has full agency powers and may bind the partnership by any act, i.e., each partner may act as though he were an individual proprietor.
General partnership differs from single ownership in that the actions of any partner not only affect himself but they affect other partners also. As the partnership grows or personnel changes occur, additional partners can be had with the consent of all old partners.
Advantages of General Partnership:
(i) Large capital is available to the firm.
(a) The firm possesses much better talents, judgment and skills.
(iii) General partnership is easy to form and is relatively inexpensive in terms of organization cost.
(iv) Incentive for success is high.
(v) There is a definite legal status of the firm.
(vi) Partners have full control of the business and possess full rights to all profits.
(vii) Partnership associates tax advantages with it.
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