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Lecture notes of 56 pages for the course klsdjkljflsdf at AUC (lecture notes)
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Business AdministrationMeaning: Any activity carried out with a view to make profit; The regular production,
purchase and sell of goods and services with the aim of earning profits and acquiring
wealth through the satisfaction of human wants.
Characteristics:
- Production of goods and services
- Exchange motive (wealth)
- Regularity or continuity of dealings.
Where profit is reward for the entrepreneur for the entire premier for undertaking a risk.
- Uncertainty of return.
Types:
Industry and commerce
Industry refers to that part of business that is concerned with the production of goods
and services.
- Extraction industries
- Capital industries
- Genetic industries – Reproduction and mulplication of certain plants and animals
with the objective of earning profits from their selves.
- Manufacturing industries –engaged in the conversion or transformation of raw
materials or finished products into final materials.
- Construction industries
Commerce
Covers all those activities that take place in a community in its efforts to produce goods
and services for its members and their distribution.
Components or scope
- Trade; actual buying and selling of goods and services
Home trade and foreign trade.
Home trade flows from manufacturer – wholesaler – retailer and to the consumer.
Foreign trade – trade outside four frontiers
- Transport and communication
- Finance, banking, insurance
- Aids to trade: Storage, services of professionals
Purpose of Business
- Profits (economic)
- Social responsibilities Peter Draka
The economic objectives include creation of a customer, survival, growth, profit.
Social objectives: Employment, good relationship with your customers / reputation.
Good customer care, education of customers, (investors, creditors, suppliers) –
Dividends, timely payments of loans and invoices and taxes for government, protection
of environments, contribution to research / donations.
,Forms of Business organisations
Sole / one man business: characteristics by the following: - single ownership, unlimited
liability, undivided risk (bears the risks alone), the owner and the business are the same
/ no separate legal entity, no government intervention.
The following are the advantages:
Easy decision-making: easy to begin, direct motivation because of unshared profits, it is
flexible, secrecy, freedom from government regulation.
Demerits
Lack of collateral security therefore liability to borrow and lack of capital, unlimited
liability, death of the business; poor decision making / limited managerial skills,
demotivation because of unshared losses.
Partnership – An improvement over a sole proprietorship. This is an association of two
or more people with the aim of making profits. Banking 2-10 any other businesses 2-
20.
Characterised by: There has to be a business
- Plurality of persons that is more than one
- Contractual agreement usually by a partnership deed.
- Principal – agent relationship.
- Unlimited liability.
Who can be a partner?
Anybody who is legally capable of contracting / contractual capacity that is sane,
financially sound can be a partner.
Formation of a partnership:
- By word of mouth (expression / oral agreement)
- By writing (partnership deed) / regulation.
- By implication (implied agreement)
In Uganda partnerships are registered under the partnership ACT 1932.
In partnership deed, the following are spelt.
a) Mode of sharing the profits
b) Names and signatures of partners
c) Interest
d) Winding up / changes and dissolution
e) Withdrawals / drawings
f) Salaries
g) Administration
Kinds of Partners
1. Active partners / active management of businesses are liable to third parties.
2. Dormant partners / sleeping partners also liable to outsider.
3. Nominal partners / quasi- do not have capital in the business, he is known, he is
liable to third parties too, gets something like a good will for using his name.
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, 4. Minor partner who enjoys limited liability. His decisions are not legally
binding.
Advantages
1. Going concern / survival capacity if provision are made.
2. Increased capital
3. Motivation
4. Better management skill
5. More access to credit
6. Pooling of risks
7. Losses are shared / risks are spread
8. Relatively easy to form
9. Legal protection / legally binding
10. Flexibility in management
11. Form of employment
12. Relatively easy decision making.
Demerit:
1. Unlimited liability
2. Double taxation
3. A mistake by a partner will affect other partners.
4. Less secrecy
5. Relatively limited resources
6. Non-transferability of interest (members expressly stated one cannot just move
out his capital in favour of other business ventures).
7. Delays in decision-making.
8. Instability of business.
JOINT STOCK COMPANIES
Came up as a result of failure of one man and partnerships as a result of increased
demand for goods and services.
This is a voluntary association of person incorporated into a business having in capital
divided into transferable shares, with limited liability, a common seal and perpetual
succession.
Characterised by the following:
- Voluntary association
- The liability is limited
- There is a common seal.
- Artificial personality (creation of the laws).
- Independent legal entity
- Share, transferability / the degree depends on whether the company is public or
private limited.
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, TYPES
Joint Stock Company incorporated under a special royal charter for example.
Imperial British East African Company IBEA.
Joint Stock Company incorporated under the companies Act
– Private limited companies
a – Public Limited Companies Companies Limited by shares
- Government companies
b Companies limited by guarantee for example NGO. Clubs, associations.
Companies enacted by statute. Such companies are formed for a special or specific
purpose.
PRIVATE LIMITED COMPANIES
These make the majority in the Ugandan context. A company that imposes 3
restrictions that is does not invite the public to buy shares; membership must not exceed
50; uneasy transferability of shares.
They feature the following:
- All the features of Joint Stock Companies other than those mentioned above.
- It imposes three restrictions as mentioned above.
Public Limited Companies
- It is not a private limited company
- Does not impose the 3 restrictions as a private limited company.
- Minimum number is 7- to indefinite.
Government Companies. The government has to be the majority shareholders. 51% as
against 49%.
Parastatals / Statutory Company / Public Enterprise
These are companies fully owned by governments
They are formed by decree or act of parliament.
There has to be a special need for them to be formed
Companies limited by Guarantee: This is where a person / persons undertake to
guarantee the liabilities of the organisation for example clubs, NGOs. The persons who
float the company undertake at the time of floating a guarantee that in the event of
winding up of the company and the assets of the company do not sufficiently cover the
creditors demands (liabilities), they will contribute a stated sum, towards the liquidation
of the creditors liabilities – companies limited by guarantee are governed by A Board of
Governors. They are always non-profit making organisations.
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