Business organizations are financial entities owned and managed either by an individual or a group of individuals or even government agencies. These organizations are set up with the aim of providing goods and services that is intended to satisfy human wants through the effective use of available economic resources.
Business organizations in one way or the other have a greater role to play in the growth, development and productivity of the Nigerian economy. As it positively improves the economy, there is also a commensurable rise in the country’s gross domestic product (GDP).
For this reason, it is therefore important that we discuss all what business organization is about; its types and forms.
With the knowledge of business organizations, entrepreneurs are conversant with the method that perfectly suites the type of business they intend venturing into.
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Types of Business Organizations in Nigeria
Basically, there are two major types of business organizations and they are:- Public enterprise
- Private enterprise
- Public enterprise
Public enterprises are established either by the federal, state or local government.
Unlike private enterprises, public enterprises are focused on providing social amenities and other related services to the public. This is as a result of the fact that public enterprises are owned, managed and controlled by the government.
Although managed by the government, it is impossible for the government to fully take charge of the exercises going on in the different sectors and business organizations spread throughout Nigeria.
- Private enterprise
These are private sector enterprises that are owned and managed by private individual(s).This form of enterprise is setup with the sole purpose of maximizing profit.
Forms of organizations under this category include sole proprietorship, partnership, private and public limited liability company etc.
Owners of private enterprises are the major influencers in the business as they responsible for the decisions made in the beginning and during the management processes of the business. As a matter of fact they tend to enjoy the profits made from the business and also bear all losses attached to the business. They are also in charge of providing capital for establishing the business.
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Forms of Business Organizations
Business organizations are classified into various forms. Classification in this case is done according to the feature each form entails.
Below is a well detailed explanation of the various forms of Business organizations:
- Sole Proprietorship
- Partnership
- Corporation
- Limited Liability Company
- Cooperative Business
- Sole Proprietorship
Sole proprietorship is the oldest and most common form of business entities in Nigeria that involves the ownership, management, finance, management and operation of a business by a single individual. This form of business is easy and cheap to set up and manage.Sole proprietors are fully responsible for the control, decision making, and financing of the business. As the only organizing body of the business, they enjoy all the profits alone but also suffer all losses incurred in the business.
Sole proprietors are faced with certain issues of limitation in management and financial resources. Also, the business may collapse if the proprietor dies.
- Partnership
Unlike sole proprietorship, businesses under the partnership form of business organization are owned and managed by two or more persons. Partnerships are classified into General and Limited Liability partnership.General or unlimited liability partnership entails Partners sharing the workload evenly and also engaging in equal sharing of the profit and losses incurred.
Limited liability partnership, on the other hand, entails uneven sharing of workload thereby allowing one partner to have a greater control of the business while the other contributes financially.
Partnership businesses are easy to manage and are more advantageous in terms of finance but can encounter problems of instability and ineffective decision making process.
- Corporation
Corporation is a form of business organization in which the owners commonly known as stockholders have limited involvement in the affairs of the business. It is regarded as a public limited liability company that deals on shares.Businesses in this case provide limited liability for stockholders and are controlled by elected major shareholders called the board of directors.
Stockholders are allowed to sell their interests (shares) since the affairs of the corporation are not dependent on the stockholders.
Corporation business is not easy to set up and usually involves the aid of an attorney for guidance through the process of incorporation.
- Limited Liability Company
This is a form of business organization that possesses features of corporation and partnership business organizationfor the purpose of profit maximization.Businesses under this form of business organization are managed by more number of people than in partnership business. Therefore it is comfortably financed and well managed.It is better than sole proprietorship business as it provides shareholders with limited liability and allows them to limit their personal assets. They (shareholders) only loose unpaid assets in a case of business failure.
This form of business organization is also known as joint stock company and it is divided into public and private limited company.
In private limited company, shares are sold privately through private placement.
In public limited company, shares are sold out to the public in order to raise capital in running the business.
- Cooperative societies
Cooperative societies or businesses are non profit organizations that focus on providing useful services to its members. Even societal earnings are shared amongst the members.
Cooperative business organizations are owned and operated by people of the same interest that gather their resources together for the collective good of their members. They share these resources amongst themselves and also provide loans to their members.
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Wrapping Up: Types and Forms of Business Organizations in Nigeria
Entrepreneurs need the knowledge of business organization to determine the nature of business they want to embark on. The form of business an entrepreneur chooses will definitely affect the growth and success of such business.Having a good choice of form of business entity for your business makes you know how to structure and strategies the business. The organizational structure for a partnership business will not be the same as that of a sole proprietorship business.
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