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Chapter: Principles of Management

Organization and Environmental Factors

An organization is a group of people intentionally organized to accomplish a common or set of goals.

Organization and Environmental Factors

An organization is a group of people intentionally organized to accomplish a common or set of goals. Types of Business Organizations


1 Sole Proprietorships


The vast majority of small business starts out as sole proprietorships very dangerous. These firms are owned by one person, usually the individual who has day-to-day responsibility for running the business. Sole proprietors own all the assets of the business and the profits generated by it. They also assume "complete personal" responsibility for all of its liabilities or debts. In the eyes of the law, you are one in the same with the business.


2 Partnerships


In a Partnership, two or more people share ownership of a single business. Like proprietorships, the law does not distinguish between the business and its owners. The Partners should have a legal agreement that sets forth how decisions will be made, profits will be shared, disputes will be resolved, how future partners will be admitted to the partnership, how partners can be bought out, or what steps will be taken to dissolve the partnership when needed.




3 Corporations


A corporation, chartered by the state in which it is headquartered, is considered by law to be a unique "entity", separate and apart from those who own it. A corporation can be taxed; it can be sued; it can enter into contractual agreements. The owners of a corporation are its shareholders. The shareholders elect a board of directors to oversee the major policies and decisions. The corporation has a life of its own and does not dissolve when ownership changes.


4 Joint Stock Company

Limited financial resources & heavy burden of risk involved in both of the previous forms of organization has led to the formation of joint stock companies these have limited dilutives. The capital is raised by selling shares of different values. Persons who purchase the shares are called shareholder. The managing body known as; Board of Directors; is responsible for policy making important financial & technical decisions. There are two main types of joint stock Companies Private limited and Public limited company.


ü Private limited company-This type company can be formed by two or more persons. Te maximum number of member ship is limited to 50. In this transfer of shares is limited to members only. The government also does not interfere in the working of the company.

ü Public  Limited  Company-It  is  one  whose  membership  is  open  to  general public. The minimum number required to form such company is seven, but there is no upper limit. Such company’s can advertise to offer its share to genera public through a prospectus. These public limited companies are subjected to greater control & supervision of control.

5 Public Corporations

A  public  corporation  is  wholly  owned  by  the  Government  centre  to  state.  It  is established usually by a Special Act of the parliament. Special statute also prescribes its management pattern power duties & jurisdictions. Though the total capital is provided by the Government, they have separate entity & enjoy independence in matters related to appointments, promotions etc.


6 Government Companies

A state enterprise can also be organized in the  form of a Joint stock company; A government company is any company in which of the share capital is held by the central government or partly by central government & party by one to more state governments. It is managed b the elected board of directors which may include private individuals. These are accountable for its working to the concerned ministry or department & its annual report is required to be placed ever year on the table of the parliament or state legislatures along with the comments of the government to concerned department.

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