Enterpreneurship Development

Entrepreneurship Development

Lesson 04 : Objectives of Entrepreneurial Activities

Forms of business enterprises

The Industrial Revolution has resulted in an increase in economic activities. The improved methods of production, better technology, expansion of transport, communication and banking facilities gave birth to large scale enterprises

1. Private Enterprises:
   1. Single individual promotes, finances, controls, and manages, the business enterprise. Bears the whole risk of the business. may appoint employees to help in running the enterprise, but does not share the gains and risks. This type of organization is generally used by small traders, professional people, service enterprises etc.

      Advantages

      1. It can be formed and operated easily.
      2. Organization and operation costs are cheaper.
      3. It develops initiative, self- reliance and independence.
      4. There is flexibility and directness of control.
      5. Trade secrets (methods and processes) are maintained.
      6. Unlimited liability helps to obtain credit.

      Disadvantages

      1. Success depends on skillful decision – making.
      2. Unlimited liability is a big risk.
   2. Partnership: This type grew out of the limitations and failures of sole proprietorship. More finance if needed requires more people to manage business and share risks. Partnership is the association of two or more people to carry on, as co-owners, a business and to share its profits, and losses. This represents the second stage in evolution of the forms of enterprises.

      Advantages

      1. Unlimited liability is a safeguard against risky ventures.
      2. It can be formed and dissolved without much legal formality.
      3. It is elastic. It may take partners if required.
      4. Capital raising fir the business becomes easy.

      Disadvantages

      1. Unlimited liability makes it unsuitable fir risk bearing enterprise.
      2. Dispute among partners may collapse the business.
      3. It may be liquidated by death, bankruptcy or retirement of a partner.
   3. Company organization: Suitable for large scale enterprise. If there are more funds you will have more people. A company is ‘an association of people who contribute money or money’s worth to a common stock; and employ it in some trade or businesses, and share the profit and losses arising there from’. In India, the Companies Act 1956 registers the companies. The company can be private or public. Maximum number of members in a private company cannot be more than 50.
2. Co-operative concerns: Started with a view to serve the members and not to a mass wealth. Members work together in order to achieve economic objectives. It is a democratic set up run by its members for serving their interests. Promotes ‘self-help through mutual help”. ‘All for each and each for all’- collective, joint help.
3. Public enterprises: Whole or most of the investment is done by government. Major aim is to provide goods and services to the public at reasonable price. Primary objective is social service with little profit.
   1. Departmental organizations which have a minister to administer the organization like Railways, Posts & Telegraphs, Radio & Television.
   2. Public Corporations: Reserve Bank of India, Damodar Valley Corporation, State Trading Corporation.
   3. Government Company: whole or majority of capital (at least 51% shares owned by Government Registered both as Public Limited or Private Limited. Company. Steel Authority of India, Coal Mines Authority