BUSINESS ENGLISH

BIM 2 / DSG 2

FIRST SEMESTER

Academic Year: 2018/2019

 CHAPTER 2:
TYPES OF BUSINESSES

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 What are the different forms
of business organization ?

Several types of organizations are engaged in business

:sole proprietorship, partnership, corporations, co-
operative societies, combinations, franchising, and
nationalized industries.

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 What is a sole proprietorship ?
A sole proprietorship, or person in business for
himself; also called a one-man concern, is the
simplest form of business organization. When
somebody owns his business and runs it alone
he is an independent trader, a sole trader, his
business is a sole proprietorship.

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 What is a sole trader ?

Major characteristics:

He provides capital, assumes the risks and

receives all the profits.

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Sole Proprietorship Advantages & Disadvantages
 Advantages:
 relatively low start-up costs;
 greatest freedom from regulation;
 owner in direct control of decision making;
 minimal working capital required;
 tax advantages to owner;
 all profits to owner.

 Disadvantages
 unlimited liability;
 lack of continuity in business organization in absence of
owner;
 difficulty raising capital.
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 What is a partnership ?

It is an association composed of two or

more people who join together, combine
their resources, and carry on a business in
common, with a view to profit.

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 What is a partnership ?

In case of a General Partnership, partners share the

management of the business, and are all responsible for
the whole of the company’s liabilities. They own shares of
the capital and their shares are not transferable to
anybody. Only those who are named in the Article of
Association can be shareholders. The nearest equivalent in
France is the SOCIETE EN NOM COLLECTIF.

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 How is a partnership set up ?
The parties draw up and sign an arrangement
known as Articles of Partnership. Once a
partnership is formed, all the partners are
jointly liable for all debts. The firm may or not
include silent, limited or sleeping partners who
contribute a share of the capital but take no
active part in the business.

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 What is a limited partnership?

 A limited partnership is composed of one or more

general partners who manage the firm and whose
liability is unlimited; and one or more limited
partners who take no active part in the management
and whose liability is limited to the amount of their
capital contribution.

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 What is a limited partnership?

 A silent partner shares in the profits and losses of the

business, but who is uninvolved in its management,
and/or whose association with the business is not
publicly known.

 Sleeping partners can transfer their shares, with the

agreement of the general partners. The nearest
equivalent is the SOCIETE EN COMMANDITE SIMPLE.

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 How is a partnership dissolved
?

 A partnership comes to an end either on the death,

retirement, bankruptcy or insanity of one of the partners or
at the expiration of the term agreed upon for its duration.

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 Partnership Advantages & Disadvantages
 Advantages

 ease of formation;
 relatively low start-up costs;
 additional sources of investment capital;
 possible tax advantages;
 limited regulation;
 broader management base.
 Disadvantages
 unlimited liability;
 lack of continuity;
 divided authority;
 possible development of conflict between partners.
 difficulty raising additional capital;
 hard to find suitable partners;
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 What is a joint stock company ?
 A company which has some features of a corporation
and some features of a partnership.

 An organization that falls between the definitions of a

partnership and corporation. This type of company
issues stock and, stockholders are liable for the
company’s debts.

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 What is a joint stock company ?
 It’s a trading or manufacturing concern which capital
is raised by shares held as joint stock by a number of
shareholders. The company itself transacts business,
and the liability of each shareholder does not exceed
the face value of his shares.

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 What is a share (stock) ?
 Shares express ownership interest and decision
making power in the company.

 A share also represents how much of the profit each

shareholder receives. Since a joint stock company is
not necessarily a corporation, a share also represents
how much of the loss each shareholder is liable for.

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 What is a share (stock)?

As an example, a shareholder holding a 20% share in

the company would receive 20% of the company's
profits but would also be liable for 20% of the
company's debt if it could not be satisfied with
company funds.

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How is a joint stock company formed?
Two documents must first be drawn up:
The Memorandum of Association which
indicates the style, the location and the purpose
of the company, the liabilities of the members,
the amount of authorized capital and its division
into shares;

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 How is a joint stock company formed?
 The Articles of association, which are a set of rules
governing the internal management of the company:
the power and duties of directors and managing
directors, the holding of shareholders’ and directors’
meetings, and the issue and transfer of shares.

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 What is a corporation?
 A corporation is an artificial “person” created by law
and authorized to act as an individual.
 It is a legal entity that is separate from its owners,
the shareholders.
 This form of business is characterized by the limited
liability of its owners, the insurance of easily
transferable stock, and existence as an ongoing
concern.

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 What are the two types of corporation ?
 There are two types of corporation both receiving
the benefit of incorporation and limited liability. We
have the private limited company, in French roughly
speaking, a S.A.R.L. And the public limited company
,in French S.A.

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 Private Limited Company
 The private limited company is composed of one or
more members. The general public is barred from
subscription, so they cannot be asked to subscribe to
capital and the share held cannot be transferred or
negotiated without the consent of the members who
have an option on the shares. Each partner is
responsible for the companies liabilities.

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 Public Limited Company
 A public limited companies is composed of, from
seven to an unlimited number of members. The
capital is divided into shares which are offered to the
public and bought and sold on the Stock Exchange.
Each member is responsible only to the extent of his
share of capital. Shares are freely transferable.
Anyone can be a subscriber.

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 Corporation Advantages & Disadvantages
Advantages

limited liability;
specialized management;
ownership is transferable;
continuous existence;
separate legal entity;
possible tax advantage;
easier to raise capital.
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 Corporation Advantages & Disadvantages
Disadvantages

closely regulated;
most expensive form to organize;
extensive record keeping necessary;
double taxation of dividends;
possible development of conflict between shareholders and
executives.

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 What is a co-operative society?

 A co-operative retail society is a non for profit

making retail organization composed of members
who provide the capital and share the trading profits
in the form of a dividend on purchases made by
every member, or plough them back into the
commercial, educational and social activities of the
society.
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 What is a co-operative society?

A co-operative wholesale society provides goods,

capital or service for the retail societies.

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 Co-operatives Advantages & Disadvantages
 Advantages
 owned and controlled by members;
 democratic control (i.e. one member, one vote);
 limited liability;
 profit distribution (surplus earnings) to members in proportion to use of service;
surplus may be allocated in shares or cash.

 Disadvantages
 possibility development of conflict between members;
 longer decision-making process;
 participation of members required for success;
 extensive record keeping necessary;
 less incentive to invest additional capital.

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 What is a combination (or combine) ?
 It’s a group of firms operating as a unit:

 The integration may be vertical, in the form of a trust

organized to control all the processes in the production,
manufacturing and selling of the product;

 or horizontal, in the form of a cartel set up to regulate

output, distribution and prices.

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 What is a combination (or combine) ?
Other combinations are the holding company, which is a company
formed to acquire a controlling interest in one or more other
companies, and the pool, which is an agreement among
competing firms by which prices are fixed, business divided
and profits shared.

 The conglomerate is a multiple-industry company combining

companies in non-competing fields.

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 What is franchising ?

It’s a form of business ownership that comprises a

franchiser and a franchisee.

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 What is franchising ?

The franchiser company allows the franchisee to sell its

products or service, and supplies equipment and advice.

The franchisee can therefore expand without the need for

major capital investment.

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 What is franchising ?

In return for this the franchisee invests the capital and pays
royalties to the franchiser out of profits made, and receives a
well-known or well-supported product or service.

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 What is a nationalized
industry?

It’s an industry such as the railways, housing, coal-

mine, etc. which has been put under national control
and organized in the form of a corporation or board.

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Bibliography

Business Law in the Global Market Place : The effects on international

business
Auteur: Nayler, Peter A.
Editeur: Taylor & Francis
Année de Publication: 2005
Available online at:
http://international.scholarvox.com/reader/docid/10120352/page/149