Introduction to business

Assignment NO.1

Submitted to: Dr Saba Zehra

Submitted by: Muhammad Waqar

Father's name: Muhammad Iqbal

Bs 1 section A

Morning Abdulhaq campus

Q.1 you want to start a new business:

A) Explain factors for selection of type of ownership:

1. Nature of Business:

The most important factor for the selection of type of ownership is the
nature of business. There are three main types of ownership 1.Sole
proprietorship 2.Partnership 3.Corporations. Sole proprietorship is a
type of business where everything is under the control of owner.
Partnership is a type of business where two or more partners control
business equally or according to an agreement made by them.
Businesses and corporations are organized in a hierarchical structure so
management can run the company in a managed way. When
businesses are small, or just starting out, the organizational structure
may be fairly simple. But as companies grow, the structure becomes
more complex.

2. Ease of Formation:

Ease of formation means a type of organization with the least expense

and minimum of legal formalities at the time of formation. An ideal
form of organization is, therefore, one which can be brought into
existence with the least difficulty.

3. Ease of Raising Capital:

Another important factor for a good form of organization is ease of

raising required amount of capital. The investors of the business should
be assured of safety of investment, fair return on investment and
transferability of investment.
4. Control and Management:

The degree of control and management shifts with the type of

ownership. In sole proprietorship, owner has complete control over the
business and in partnership, management and control of business is
jointly shared by partners except to the extent of some responsibilities.
In a company, however, the management and control of company
business is entrusted to the elected representatives of shareholders.

5. Risk and Liability:

The amount of risk and liability depends on the nature and size of
business. Smaller the size of business, smaller the amount of risk. Thus,
a sole proprietary business carries small amount of risk with it as
compared to partnership or company. However, the sole proprietor is
personally liable for all the debts of the business to the extent of his
entire property. Likewise, in partnership, partners are individually and
jointly responsible for the liabilities of the partnership firm.

Companies have a real advantage, as far as the risk goes, over other
forms of ownership. Creditors can force payment on their claims only to
the limit of the company’s assets. Thus, while a shareholder may lose
the entire money he put into the company, he cannot be forced to
contribute additional funds out of his own pocket to satisfy business
debts.

6. Flexibility of Organization:

Flexibility of organization means that a business should be formed in

such a way that it allows itself to any change and adjustment without
any risk and difficulty. Sole proprietorship is the easiest type of business
organization in the aspect of making any changes.
7. Continuity or Stability:

An ideal form of business should be able to continue its business

operations and remain stable over a long period of time. A stable
business is preferred by the owners insofar as it helps him in attracting
suppliers of capital who look for safety of investment and regular
return, and also helps in getting competent workers and managers who
look for security of service and opportunities of advancement.

8. Division of Profit:

Sole proprietorship is the best type of ownership if the owner wants to

have everything for himself. If the intent to jointly share the gains
arising out of joint contributions in the form of resources and effort,
partnership venture is to be picked up. In a company form of business,
the intent is to grow business, exploit the markets globally, make
profits and share wealth with a large number of stakeholders.

Conclusion: Personally I would choose Partnership because it is easy for

partners to raise capital as compared to sole proprietorship and they
can also share their responsibilities so that they can run the business
easily. In partnership if there is loss then partners can share the loss
which will put fewer burden on each partner.

B) Describe business problems in Pakistan:

1. Registration Problem:

It is one of the biggest problems for new businesses in Pakistan.

Basically it’s a two year procedure for the registration of a new brand
and after three month of the registration a new product can be
launched. New businesses don’t want to wait for such a long period of
time to just get their brand registered, they don’t have enough time
and finances in order to utilize on business which is not yet registered.

2. Corruption in Government Departments:

Most of the government departments in Pakistan are corrupted and

bribery is seen as a common thing. Most of the government employees
will ask for bribe or as they called it "commission" to do their work.

3. Lack of Communication:

Most of the Pakistani businesses do not even have a proper way to

communicate with other companies. This makes it difficult for new
businesses to ask any queries and clear their confusion about anything.

4. Labor Crises:

In Pakistan there is an abundance of labor force but there is only a

small amount of labor force which is qualified and most of the labor
force is unqualified. So the businesses have to train their labor before
they can use them efficiently. But even after training them, most of the
labor force is not committed which ultimately waste both time and
money.

5. Tax Burdens:

Taxes in Pakistan are mismanaged. Sole proprietors and partnership

businesses do not have to pay any sort of income tax only if they have
taxable incomes below Rs. 400000. However for private limited
company or other forms of limited company it is eligible to pay taxes
even if the profit is Rs. 1.
C) Explain scope of YOUR business:

Personally I would choose Restaurant business. It is one of the most

lucrative and everlasting business around the globe. It is a multi-billion
dollar industry that is rapidly growing across the world. If a restaurant is
successful, the profit margins can be to the tune of 40% per month. This
makes it more profitable than property investment, which gives you a
return of up to 25% annually. The unprecedented growth of this sector
is quite evident, thereby inducing restaurants all over the world to stay
ahead in the competition and increase their scope of revenue
generation.

Q.2 Why as subject study of “introduction to business" is necessary

for students of commerce?

As you can guess from the subject’s name, business studies equip
people for the dynamically developing the corporate world. While
studying at school or college, students gain some of the critical
business-related skills. Studying business disciplines can assist in hitting
various targets. Such education creates a solid foundation for people
who want to move on and open their own companies. It is a chance to
obtain both the knowledge of theory and practical skills. What is more
important, business education provides real-world experience and
prepares students for grown-up life and independence. It teaches how
to earn money in any life situation. By attending business classes,
students can realize their true calling. Various tests detect business
potential and may show the right direction.