Here is your sample essay on business

A business undertaking is an organisation which is engaged in some industrial or commercial activity. It represents an institutional arrangement for carrying on any kind of business activity. It may be owned and controlled by a single individual or by a group of individuals who have entered into a formal or informal agreement to jointly conduct the business.

Every business undertaking is a separate and distinct business unit. It has its own identity and separate ownership. It can be distinguished from other undertakings on the basis of its own­ership, management and control.

According to Wheeler, a business undertaking is a concern, company or enterprise which buys and sells, is owned by one person or a group of persons and is managed under a specific set of operating policies”.

Thus, a business undertaking may be defined as an organisation operating under separate ownership, management and control and carrying on any business activity with independent risk- bearing.

All business undertakings are directly or indirectly engaged in the transfer or exchange of goods and services for value. They deal in goods and services on a regular basis. Their main motive is to earn profits and they are exposed to various types of risks.

Characteristics of a Business Undertaking

The basic features of a business undertaking are as follows:

1. Separate identity:

Every business undertaking has a separate identity. It has a distinct name and separate existence. Its assets and liabilities are independent of the other undertakings. Its accounts are separate from those of the persons who own it.

2. Independent ownership:

A business undertaking is owned by the persons who contribute its capital. The owners may be private individuals or the government. Every business undertaking thus has an independent unit of ownership.

3. Independent management:

The form of management of an undertaking depends on its nature and size and legal requirements. But every business undertaking has its own independent management. The management of one undertaking does not interfere in the working of other undertakings. The management of each undertaking takes independent decisions concerning different aspects of business.

4. Element of risk:

Every business undertaking involves risk. Profit is the reward for bearing risk. The risk of an undertaking is borne by its owners though some of the risks may be covered through insurance.

Types of Business Undertakings

Business undertakings may be classified into three broad categories as follows:

1. Private Sector Undertakings:

These undertakings are owned, controlled and financed by private businessmen. There is no Government participation in them. The main motive of private sector undertakings is to earn profits. Their main characteristics are as under:

(a) Private Ownership and Control:

A private sector undertaking is fully owned and con­trolled by the private entrepreneurs. It may be owned by one individual or by a group of individuals jointly. When owned by one person, it is called Sole Proprietorship.

A group of persons may joint own the firm in the form of joint Hindu family business, partnership, joint stock company or cooperative society.

(b) Profit Motive:

The main objective of private sector undertakings is earning profits. Prof­its provide the reward for the risk assumed and the required return on capital.

(c) No State Participation:

There is no participation by the Central or State Governments in the ownership and control of a private sector undertaking.

(d) Private Finance:

The capital of a private sector undertaking is arranged by its owners. The sole trader contributes the capital of a sole proprietorship. In case of partnership, capital is invested by the partners. A joint stock company raises capital by the issue of shares and debentures. A private sector undertaking can also raise loans to meet its long- term and short-term needs for funds.

(e) Independent Management:

A private sector undertaking is managed by its owners. In case of sole proprietorship and partnership, the owners directly manage the firm. The management of a joint stock company lies in the hands of directors who are the elected representatives of the shareholders.

2. Public Sector Undertakings:

These undertakings are owned and operated by the Central and State Governments. The main characteristics of public sector undertakings are given below:

(a) State Ownership:

Public undertakings are fully owned by the Government or some public authority. For example, Reserve Bank of India is owned by the Central Govern­ment, while Delhi Transport Corporation is owned by the Government of Delhi State.

(b) Government Control:

The ultimate control of a public sector undertaking lies with the Government.

(c) Service Motive:

The primary objective of a public sector undertaking is to render service to the public at large. In order to serve the public, it may even incur loss. For example, the Food Corporation of India provides food grains to the public at subsidised prices.

(d) State Financing:

The Government provides the capital and funds through appropriations from its budget. The Government may also provide loans from time to time from the State exchequer.

(e) Bureaucratic Management:

The management of public sector undertakings is bureau­cratic in the sense that their operations are governed by certain rules and regulations prescribed by the Government.

(f) Public Accountability:

Public sector undertakings are accountable to the public at large for their performance and results. The annual audit of these undertakings is conducted by the Comptroller and Auditor General of India. Moreover, their annual reports are subject to discussion in the Parliament or the State legislature.

3. Joint Sector Undertakings:

Joint sector consists of business undertakings wherein the ownership, control and management are shared jointly by the Government, the private entrepre­neurs and the public at large.

According to the guidelines laid down by the Government of India, the share capital of a joint sector undertaking (without foreign participation) is to be divided as follows: Government 26 per cent, private businessmen 25 per cent and the public 49 per cent.

No single individual or organisation can hold more than 25 per cent of the paid-up-capital of a joint sector enterprise without the permission of the Central Government.

In case of foreign participation, the respective shares will be: Government 25 per cent, Indian entrepreneur 20 per cent, foreign investor 20 per cent and the investing public 35 per cent.

Maruti Udyog, Cochin Refineries and Gujarat State Fertilizers are examples of joint sector undertakings in our country.

The main characteristics of joint sector enterprises are as follows:

(a) Mixed Ownership:

The Government, private entrepreneurs and the investing public jointly own a joint sector enterprise.

(b) Combined Management:

The management and control of a joint sector enterprise lies with the nominees or representatives of the Government, private businessmen and the public.

(c) Share Capital:

The shares of the Government, private businessmen and the public in the capital are 26 per cent, 25 per cent and 49 per cent, respectively. The aim is to pool the financial resources and technical know-how of the State and the private individuals.