Financial Accounting Overview: Business Types and Formation

1. DR. SALMAN MASOOD SHEIKH PhD Business Administration (Islamic Banking & Finance) Fellow Cost and Management Accountant (Pak) Certified EOMS Professional (USA) PhD, M.Phil, M.Com (Accounting), MBA (Finance) FCMA, FPFA, ACPA, AM-IFMP, AITM, CIMA (SLCS), CA (Int) Professional Experience: 7 Years as Manager Finance and Accounts Academic Experience: 18 Years (Teaching) Director (Quality Enhancement Cell) / Associate Professor Superior University Lahore Cell: 0300-6337009 Email: directorqa@superior.edu.pk

2. Financial Accounting Introduction to Business (Types and Formation)

3. Finance means Cash and Cash Related Items FINANCIAL WHY TO TEACH THIS COURSE IN COMPUTER SCIENCE DEPARTMENT Introduction Financial Accounting Recording and Decision Making ACCOUNTING

4. A Business is defined as an organization or enterprising entity engaged in commercial, industrial, or professional activities. Businesses can be for-profit or non-profit organizations. Business Organization & its Types Organization is a social unit of people that is structured and managed to meet a need or to pursue collective goals.

5. Concept: • A sole proprietorship is defined as a business owned by a single person who receives all profits & assumes all risks. • Owners of this form of business are 'self-employed’; usually the owners are the active managers. • Advantages • A sole proprietorship is easy and inexpensive to set up. • No state charter is needed. • No legal agreement or fee is required • The only other legal requirement is that the activity itself must be legal. • It allows the owner much freedom. • He/ she can take action on decisions promptly. • The owner can also change methods of doing business quickly. • All profits go to the proprietor. • Disadvantages • Inability to raise large sums of capital. • A sole proprietor's credit rating is usually lower than that of a large firm, • The sole proprietor cannot attract investors by sharing ownership of the business. • Profits alone are often too low to afford expansion. • Limited life • Unlimited liability for debts • Lack of assistance in management • Operational problems Types of Business OrganizationSole Proprietorship

6. Concept: • A partnership is a formal arrangement by two or more parties to manage and operate a business and share its profits. • Advantages • Two heads (or more) are better than one • Your business is easy to establish and start-up costs are low • More capital is available for the business • You’ll have greater borrowing capacity • High caliber employees can be made partners • Tax savings • There is limited external regulation • It’s easy to change your legal structure later if circumstances change. • Disadvantages • The liability of the partners for the debts of the business is unlimited • Each partner is ‘jointly and severally’ liable for the partnership’s debts; • There is a risk of disagreements and friction among partners • Each partner is agent of partnership & is liable for actions by other partners Types of Business OrganizationPartnership

7. Types of Business OrganizationComparison of Sole Proprietorship and Partnership

8. Concept: • Public Limited Companies are those types of companies where minimum number of members is Seven and minimum number of Directors is Three and there is no cap on the maximum number of members.  Characteristics of Public Limited Company • Members– To start a company, a minimum number of 7 members are required • Limited Liability– The liability of each member or shareholders is limited. • Perpetual succession– The company keeps on existing in the eyes of law even in the case of death, insolvency, the bankruptcy of any of its members. • Index of members–  A public company is required to maintain an index of its members • A number of directors– When it comes to directors a public company needs to have only three directors. • Paid up capital– It must have a minimum paid-up capital of Rs 5 lakh or more • Prospectus– Prospectus is a detailed statement of the company affairs • Name– It is mandatory for all the Public companies to use the word  limited after its name. Types of Business OrganizationPublic Limited Company

9. Types of Business OrganizationPublic Limited Company

10. Concept: • A private limited company is a company which is privately held for small businesses. Characteristics of Private Limited Company • Members– To start a company, a minimum number of 2 members are required and a maximum number of 200 members. • Limited Liability– The liability of each member or shareholders is limited. • Perpetual succession– The company keeps on existing in the eyes of law even in the case of death, insolvency, the bankruptcy of any of its members. • Index of members– A private company don’t have to keep an index of its members • A number of directors– When it comes to directors a private company needs to have only two directors. • Paid-up capital– It must have a minimum paid-up capital of Rs 1 lakh or more • Name– It is mandatory for all the private companies to use the word private limited after its name. Types of Business OrganizationPrivate Limited Company

11. Types of Business OrganizationPrivate Limited Company

12. Types of Business OrganizationOther Private Sector Business Organizations

13. Types of Business OrganizationOther Private Sector Business Organizations

14. Types of Business OrganizationOther Public Sector Business Organizations

15. End of ChapterThank you