So, I visited a friend at school, and he was busy taking a class. The topic? Forms of Business organizations in Nigeria.
I stayed by the window and observed how important each form of business organization is, to the economy of the country.
Let’s just say, I was also a student that day because I had forgot key features of each of the forms of business organizations.
The pupils stared at me, I know they’ve got questions in their minds. “Why is he nodding?” To be honest, I got carried away by the way my teacher friend explained.
When I got home, I decided to write about it as many searchers would find this informative and educative.
So, let me be your tutor today, and the topic is forms of business organizations in Nigeria.
What are Business Organizations?
Business organizations are enterprises that are set up either by individuals or groups of individuals, governments and their agencies, with the sole purpose of providing goods and services that satisfies human wants.
Is that all? No The major motive behind providing goods and services is to make profits.
All forms of business organizations, be it large or small in every society have substantial influence on productivity and growth of the economy.
Before starting a business idea, it’s reasonable to think about what form the business will take, don’t you agree?
So, let’s start by explaining the types of business organizations in Nigeria, before the forms of business organizations.
Types of Business Organizations In Nigeria
There are 2 major type of business organizations namely;
- Private enterprises and;
- Public enterprises
Let’s take it one after the other.
A. Private Enterprises
Private enterprises are businesses setup by individuals or groups of individuals irrespective of the types and sizes.
In other words, they are enterprises that are owned, managed, and controlled by private individuals. This form of business organizations is usually classified as private sectors enterprises.
Examples of private enterprises are sole proprietorships, partnership, private and public limited liability companies, and cooperative societies.
It is obvious that the major object of private enterprises is to MAXIMIZE PROFIT
Main features Private Enterprises Include:
- Private individuals provide the capital for the establishment
- Ownership belongs to private individuals
- Objective of the business is to make profit
- Accountability is to the owners
- Owners take risks of the business
- Owners manage the business themselves
Now, let’s take the public enterprise.
B. Public Enterprises
Public enterprises are types of business organizations that are setup by the central, state or local governments, and their agencies.
They are owned, managed and controlled by the government and their major objective is to provide social amenities and services to the people.
Public enterprises are associated with names such as Authority, Corporation, Boards and Commissions.
For example public enterprise in Nigeria include Nigerian Television Authority (NTA), Nigerian Railway Corporation (NRC), Nigerian Ports Authority (N.P.A), Federal Capital Development Authority (FCDA), just to mention a few.
Interestingly, the government may decide not to own a business organization solely and in this case, it buys a part of the shares or majority of the shares in such establishment.
Also Read: What are shares of a company
Features of Public Enterprises Include:
- Ownership belongs to the government
- The government provides the capital to run the business
- The major objective is to provide social services at reduced costs
- Board of directors is appointed to manage the business enterprise
- The management is accountable to the government
- Public enterprise is a legal entity, meaning it can sue and be sued in its own right.
Now, you have a perfect understanding of each of the types of business organizations.
You should know that these organizations can be found in different proportions in countries that allow the private sector to contribute to the total output of the county.
With this analytical approach into the topic, I think it’s best to discuss the forms of business organizations in Nigeria.
Also Read: The difference between building a small business and building a start up
Forms of Business Organizations In Nigeria (Business Structures)
There are 5 different forms of business organizations in Nigeria namely;
- Sole Proprietorship
- Cooperative societies
- Joint Stock Companies, and;
- Public enterprises (which has been explained above. Learn more about Public enterprises in this short post)
Now, let’s take it one after the other.
1. Sole Proprietorship Business
Sole proprietorship is a kind of business or form of business enterprise, owned, finance, and managed by one person, with the primary aim of making profit.
This form of business is the oldest and it is common all over Nigeria, just like in other countries of the world.
Learn more about the Sole Proprietorship Business in this detailed post.
2. Partnership Business
Partnership Business is also one of the common forms of business organizations.
A partnership is a business organization in which two or more (but not more than twenty) persons come together, agree to legally combine resources, set up, and manage a business.
The major objective here also, it to maximize profit.
Each partner contributes funds and efforts and profits are shared on an agreed ratio, usually proportional to the amount of capital contributed by each partner.
In the United states however, any number of persons can set up a partnership.
Learn everything about the partnership business organization and find more information about features, sources of capital, merits, and demerits
Another form of business organization is Cooperative society.
From the name, Cooperative Society is a form of business organization that is jointly established and owned by people of the same interest, who pull their resources together to assist, promote, and protect the interest of their members.
At the beginning, the cooperative was mainly aimed at organizing non profit institution that would protect members from being exploited by the capitalist shop owners who sold goods at very costly prices.
The modern cooperative started in 1844 at Rochdale in Britain, and since then, it has become more interesting.
Get a wider scope of cooperative society in this detailed post, understand the types of cooperatives, features, and how these forms of business organization can help you achieve your financial goals.
Joint Stock Companies
The Join Stock Company is one of the forms of business organization in Nigeria.
It is also called the Limited Liability Company In Nigeria and Britain or the Corporation in the United States of America.
It is always the most important form of business organization in an economy. Also, it is the greatest innovation in business organisation as rapid expansion of total output with minimum risk is possible.
Joint stock company unlike sole proprietorship business is a legal entity. It is recognized as legal and seen as separate from it’s owners.
Learn everything you need to know about Joint Stock Company in this detailed post.
In there, you’ll find information about the setup, article of association, memorandum of association, advantages, and disadvantages.
Related: All forms of banks in Nigeria explained
Forms of Business Organizations (Summary)
In one of my posts on Building a business from scratch in Nigeria, I talked about filling a gap and with this you’re business.
But that is not enough, having a perfect understanding of each of the forms of business organizations will help you put that business in it’s right hole.
Click of the links provided on each of the business structures to learn more, and if you find this post helpful, please drop a comment.