Term: 2nd Term
Week: 5
Class: Senior Secondary School 1
Age: 15 years
Duration: 40 minutes of 2 periods each
Date:
Subject: Economics
Topic:- Business organizations: sole proprietorship and partnership
SPECIFIC OBJECTIVES: At the end of the lesson, pupils should be able to
- Define sole proprietorship and partnership
- State the features of sole proprietorship and partnership
- Highlight the advantages and disadvantages of sole proprietorship and partnership
- Outline the sources of funds for sole proprietorship and partnership
INSTRUCTIONAL TECHNIQUES: Identification, explanation, questions and answers, demonstration, videos from source
INSTRUCTIONAL MATERIALS: Videos, loud speaker, textbook, pictures
INSTRUCTIONAL PROCEDURES
PERIOD 1-2
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PRESENTATION
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TEACHER’S ACTIVITY
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STUDENT’S ACTIVITY
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STEP 1
INTRODUCTION
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The teacher reviews the previous lesson on firm and industry
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Students pay attention
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STEP 2
EXPLANATION
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She explains the meaning of sole proprietorship. She further discusses the features, advantages, disadvantages and sources of funding for sole proprietors.
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Students pay attention and participates
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STEP 3
DEMONSTRATION
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She explains the meaning of partnerships. She further discusses the features, advantages, disadvantages and sources of funding for parnterships
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Students pay attention and participate
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STEP 4
NOTE TAKING
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The teacher writes a summarized note on the board
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The students copy the note in their books
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NOTE
BUSINESS ORGANIZATIONS
- SOLE PROPRIETORSHIP
A Sole proprietorship is an enterprise owned exclusively by one natural person and in which there is no legal distinction between the owner and the business entity.
FEATURES OF SOLE PROPRIETORSHIP
- Owned by one person
- Unlimited liability
- No Profit maximization motive
- Capital provided by the proprietor
- A separate legal entity.
ADVANTAGES OR MERITS OF SOLE PROPRIETORSHIP
- Decision-making: Quick decisions are easily taken by the sole proprietor alone without the consent of other workers in the organization.
- Capital required: the sole proprietorship requires very small capital to set up.
- Establishment: it is very easy to establish because of the small capital requirement.
- Profits: all the profits derived from the business belong to the owner of the business because the capital outlay came from him.
DISADVANTAGES OR DEMERITS OF SOLE PROPRIETORSHIP
- Problem of continuity: The death of the owner may cause the business to die with him, especially when there is no successor to take over from him.
- Unlimited liability: he bears the entire risk of the business alone. If the business fails, he bears the entire loss and his personal belongings have to be sold to pay his creditors.
- Lack of specialization: the proprietor is personally involved in every section of the business. He works very hard. He does not usually take leave. He therefore tends to over work himself to the detriment of health.
SOURCES OF FUNDS FOR A SOLE TRADER
- Personal saving
- Borrowing particularly from friends and relatives
- Credit purchase from manufacturers or wholesalers
- Taking loan from bank
- Ploughed back profit
- PARTNERSHIP
Partnership is a type of business organization formed by an association of two to twenty persons having similar interests, and by agreement (usually legal) decide and plan to run a business together with the sole aim of making profit.
Formation of Partnership
A partnership is usually governed by a written agreement which is usually drawn up by a legal practitioner. The agreement is called a deed of partnership (made for the internal activities of the business) or articles of partnership (deals with the provision for the business relationship with the outsiders)
The agreement contains the following rules and regulations;
- The names of the partners
- The name of the firm.
- The nature of the business formed
- The rights and duties of each partner
- The proportion of the capital to be provided and whether interest should be paid.
- The signatories on the cheques
- The sharing of profits and provision of drawings
- Duration of partnership
- The circumstances which can dissolve the partnership
- The payment of partners’ salary
- The method of admission of new partners
- The objective of the firm.
Features of Partnership
- Ownership:the number of partners ranges from two to twenty for most business, but two to ten for banking business.
- Life span:the life span of partnership depends on the agreement signed by the partners involved.
- Management: the business has no board of directors. The active partners control and manage the business.
- Objectives: the main objective of partnership is to make profit.
- Legal entity: it is not a legal entity as the partners do not have a separate identity from the business.
TYPES OF PARTNERSHIP
There are two types of partnership, these are:
- ORDINARY PARTNERSHIP
In this type of partnership, all the partners have equal responsibility in the management of the business and are generally liable for any loss or risk. They have equal powers, unlimited liabilities, take active part, and profits are shared equally.
- LIMITED PARTNERSHIP
In this, the debts of any member are restricted to the amount of money contributed in running the business. Not all the partners take active part in the management of the business but there must be a member who takes part in the running of the business and also bears the risk.
TYPES/KINDS OF PARTNERS
- Nominal or Quasi-Partner: He contributes only his name but does not take active part in the running of business. His influence in the business can give access to certain privileges. He is entitled to the profit of the business as stated in the deeds of partnership.
- Sleeping or Dormant Partner: He contributes capital but takes no part in the conduct and management of the business. He takes part in the profit or the loss of the business as specified in the partnership agreement.
- Active Partner: This is the partner that takes part in the formation, financing and management of the business. Salary is paid to active partner who serves as the managing director of the business if it is indicated in the partnership deed.
ADVANTAGES OR MERITS OF PARTNERSHIP
- Joint decision making: When two or more partners put heads together and take joint decisions on the enterprise, better results are derived.
- There is privacy: There is privacy in conducting business affairs since it is not required to make its accounts available for public inspection.
- Greater Continuity: The death of a partner may not lead to a total dissolution of the business since the other partners can still go ahead.
- Loan facilities: A partnership can easily obtain loan from creditors since they are jointly liable.
- Personal Contact: There is still an element of personal contact with both employees and customers. This is because of the relatively small size of the business when compared with the limited liability companies.
DISADVANTAGES OR DEMERITS OF PARTNERSHIP
- Disagreement between partners can end the business.
- The partners especially in ordinary partnership can have unlimited liability in the case of liquidation of business.
- It may be difficult to manage because different opinion of a partner can hinder the decision making in the business.
- It experiences limited growth since it has no legal right to obtain more capital through share.
- Business is not a legal entity because it cannot stand as a person in the court of law.
SOURCES OF FINANCE FOR PARTNERSHIP
- Contribution from members;
- Borrowing from bank;
- Ploughed back profit;
- Borrowing private individuals;
- Sale of business assets.
EVALUATION: 1. Define “sole proprietorship” and “partnership”
- Discuss sole proprietorship and partnership under the following headings:
- features
- advantages
- disadvantages
- source of funds
CLASSWORK: As in evaluation
CONCLUSION: The teacher commends the students positively
