Business Entity
THE BUSINESS ENTITY....also known as the firm or company.
Quotation 20th May 2024
“Business is the backbone of a nation, the spine of a country. Without a strong economic and business structure, no nation can stand the test of time. It is the sweat of hard work, the ache of sacrifice, the drive of innovation that delivers the goods and services that make our lives better.” Quote by that famous British bulldog, Winston Churchill
Introduction
Business is also “A modern-day moral social phenomenon” is how businesses have been described. The social phenomenon has to do with the vast number of people employed worldwide by businesses. There are many other reasons, Read more.
The activity of a business is outside of the person.... most people want to belong to something bigger than themselves, it fulfils that role of belonging, but it does not compete with other organisations, like the church, the union, political party, or the family. Mostly the business is one of more than a few organisations, that individuals belong to.
The business provides a workplace, how important is that? Put food on the table for the family, all the necessities, and more. If they employ anyone, these business entities are responsible for attending to their well-being. More in later articles.
Well-managed businesses are fulfilling and provide opportunities for advancement. Staff are happy, excited, and passionate and take pride in the products and services their business produces and sells. If you think I am wrong.......you need these series of articles on business management.
The Business Entity as an Artificial Person
Business entities when they start up are mostly registered as separate entities. The analogy to an artificial person, the entity has a name, legal rights, power of contract, owning assets, employing people, opening a bank account, building up funds, and generally carrying out business like a person, generating income, making profits, and paying taxes.
These registered entities can be private companies, registered as Propriety Limited Companies (Pty Ltd) or Public Companies Limited (Ltd) where the owners are shareholders. Both are known as LLC Limited Liability Companies
The business entity can also be an individual known a as sole trader/ proprietor, and all legal requirements, tax, etc remain with the individual. The sole trader can register as a VAT (Value Added Tax) vendor. Sole trader, the individual is personally liable for all debt. SMEs( Small and Medium enterprises) as start-up businesses can be sole traders. For those starting a new business keep the business separate from yourself, start with its name.
Other business entities are Partnerships, often used by professional bodies. Accountants, lawyers, and Doctors and other including commercial businesses.
Trusts, Foundations, NGOs (Non-Government Organisations) NPOs (Non-Profit Organisations) there may be others. All have to subscribe to statutes with laws, rules, and regulations.
There are SOEs (State-owned enterprises). We enter an area that is not part of this article. It can become complex, we could include government departments, Clubs, Churches, Unions, Schools, Universities, Hospitals, and more...... They all should be managed like businesses. The last to be added is PPP (Private Public Partnerships) this should be subject to a separate discussion.
The Founders of Business Entities/Enterprises
Many businesses started from humble beginnings, Anton Rupert started his cigarette business by rolling cigarettes in his garage, and Steve Jobs with a partner also started off in a garage. From these humble begins, multinational companies grew, including the Rembrandt Group and Apple. Richard Maponya began by forming a milk delivery service in SOWETO.
Shareholders may change but the company, if it is financially sound and viable, goes on forever. It can grow, open new branches both nationally and internationally, it can acquire other businesses, etc. It has a strategy and a structure, its ethos and culture. It develops a history, with personalities, and legends, all of which give it background and depth.
The founder of a business entity is often an entrepreneur and can go on to build a huge enterprise, even worldwide and in the process become very wealthy. There are many such people in America, the names Rockefeller, Carnegie, Bill Gates, Steve Jobs, Elon Musk, and Warren Buffet as well as many others.
In South Africa, too, many names come to mind. Raymond Ackerman, Richard Maponya, Patrice Motsepe, Christo Wiese. It is generally accepted that these top-flight entrepreneurs have exceptional talent, the same way that a famous sportsman, musician, or actor has an exceptional talent. It takes long hours of dedication and hard work.
The wealth they generate is often a by-product of their prime purpose to create and produce something. They benefit us all and should be celebrated, many new entrepreneurs are coming to the fore and many more wealth-generating centres are being created worldwide. Entrepreneurship is not confined to individuals but also to established business entities. The longevity of these enterprises is often a product of the firm's vision and values and is embedded firm’s culture. Entrenching integrity, awarenes, empathy, pride and more tangible factors, quality, compliance and good management practices, social responsibility.
Michael Porter’s Five Competitive Forces that Determine Profitability
Business entities of any size operate in an industry and or in a segment of an industry. It is competition, we need that competition, keeps prices down and places emphasis on innovation.
Keeping the Score, Bookkeeping, and Audited Reports
Big Six headings for business entities are marketing and financial administration, operations, logistics, technology, and human resources.
Businesses registered as legal entities have to comply with legislation, the Companies Act, etc., and financial records have to be audited. There are minimum disclosure requirements, companies making maximum disclosures are a model of transparency and clarity, reading between the financial lines is not necessary, it is all there.
Governments, Unions....and Collaboration
Governments and the Unions play a huge part in the wellbeing of business. In the idealism of business management, trust, and reliability, plays a huge part between all stakeholders. Legislation can be a damper, trust businesses to do what is right and it will happen, transformation as an example. In a modern thinking business, there should be a shift in the relationship between management and workers – they are both part of the same value chain of the entity. Collaboration is better than confrontation.
Corruption
In countries where corruption is endemic, paying bribes to have anything done, or where business contracts are given to friends or family, unfair practices together with high levels of crime are a big brake on the growth of business entities. It is a bad signal to potential investors.
I am not sure the government is doing all it can to stop corruption. You want the President to draw a line in the sand, and say no more, and look the nation in the eye, and tell us of the Management Control Systems to be put in place. Tight controls that prevent innocent persons becoming criminals.
MANAGEMENT AUTHORITY/GURU
Professor Henry Mintzberg
He is a Cleghorn Professor of Management Studies at McGill University in Montreal, Canada. Described by Tom Peters as “perhaps the world’s premier management thinker”, he follows in the mould of Peter Drucker.
Mintzberg says management has been pushed aside by leadership; it should be restored to its proper place, he firmly believes. One of Mintzberg’s major focuses is to describe management as a practice. He sees the practice of management as art, craft, and science. The practice can only be taught by experience. There are many functions in management taught at business schools – marketing, strategic planning, human resources, etc. But the practice of management comes from the experience of the manager, from actually managing.
Professor Mintzberg started the MBA course on the practice of management at McGill University. This has been extended to other universities. The degree is known as IMPM (International Master in the Practice of Management). Mintzberg is the author of 15 books. Some of the best known are The Structuring of Organisations; Managers Not MBAs; Mintzberg on Management; The Rise and Fall of Strategic Planning; Managing; and Simply Managing.”
Neil Wright