Organizing

an
Source:
Enterprise
Step # 1. Determining Activities:

– The first step in organizing is to identify and

enumerate the activities required to achieve the
objectives of the enterprise.
– The activities will depend upon the nature and size
of the enterprise.
– For instance, a manufacturing concern will have
production, marketing and other.
 Step # 2. Grouping of Activities:

– The various activities are then classified into appropriate

departments and divisions on the basis of functions, products,
territories, customers etc. Similar and related activities may be
grouped together under one department or division.
– Grouping of activities helps to secure specialisation. Each
department may be further sub divided into sections and
groups. Grouping of activities should not only allow
specialisation but keep in view the human factor, nature of
activities and the needs of the organisation and the people.
Step # 3. Assigning Duties:

– The individual groups of activities are then allotted to

different individuals on the basis of their ability and
aptitude. The responsibility of every individual should be
defined clearly to avoid duplication of work and
overlapping of effort. Each person is given a specific job
best suited to him and he is made responsible for its
execution.
Step # 4. Delegating Authority:

– Every individual is given the authority necessary to

perform the assigned task effectively. Authority
delegated to a person should be commensurate with his
responsibility. Through successive delegations a clear
hierarchy of authority or chain of command running
from the top to bottom of the structure is established.
An individual cannot perform his job without the
necessary authority or power.
Step # 5. Coordinating Activities:

– The activities and efforts of different individuals are then synchronized. Such co-
ordination is necessary to ensure effective performance of specialized
functions. Interrelationships between different jobs and individuals are clearly
defined so that everybody knows from whom he has to take orders and to
whom he is answerable.
 Business Types
– Sole Proprietorship
– Partnership
– General Vs Limited
– Joint Ventures
– Corporation
– S-Corporation aka Subchapter S
Sole Proprietorship

– Simplest form of Business organization

– Owner is manager and makes all decisions
– Compliance with state and local business licensing
requirements only
– Advantages: easy to create, total control by owner,
transferable, and liquidity
– Disadvantages: personal liability, death of owner, must use
property to secure loans, taxes and benefits not tax
deductible.
 Partnership
– Two or more persons in an agreement
– Co-owners
– liability
– Partnership agreement (like a Business Plan)
– General Partnership
– Pooled resources
– Limited Partnership
– At least one general partner and one or more limited partners
– Limited partner Capital for Return on capital
– Limited say limited liability
 Partnership
– Advantages: increased ability to raise capital, pooling of resources,
pooling of talents, shared responsibility and minimal administration
costs.

– Disadvantages: General partners have unlimited liability, termination

upon death, bankruptcy or withdrawal, non-transferable, benefits not
tax-deductible
 Joint Ventures
– Special combination of two or more persons or entities.
– Specific Venture
– No designation as a partnership or corporation
– Same rules as partnership
– Usually limited to single transactions
 Corporation
– Creations of statutes
– Separate legal entity under the laws of state
– Same rights as individuals have
– Most costly to form
– Issues Stock
– ESOP
 Corporation
– Advantages: Exemption of liability, continuity of existence, death has no
effect, high level of management, transferable ownership, fringe benefits
are tax deductible, and able to raise capital.
– Disadvantages: Lack of centralized control, closely regulated, expensive,
record keeping, and double taxation.
Control of Business

– Sole Proprietorship – absolute power over all decisions.

– Partnership – Control is shared between partners as per
the agreement
– Corporation- depends on stock ownership, exercised
through regular board meetings by the board of directors