Business Organization

5.0 Opening Case 170

5.1 Introduction 171
5.2 Definition and concept of Business Organisation 173
5.3 Forms and structures of Business ownership in Bangladesh: 174
5.3.1 Different forms of business ownership: 174
5.4 Characteristics of an ideal form of organization 176
5.5 Relative position/location of each form of Business ownership (Which is 176
the best type of business organization?)
5.6 Factors influencing to Choice a Form of Business Organization 177
5.7 Comparative tax liability, assessment and returns of Business: 178
5.8 Branches/liaison/representative of foreign companies 179
5.9 Trusts 180
5.10 Joint ventures 181
5.11 100% Foreign Investment in a Business 184
5.12 Franchising 185
5.12.1 Franchising concept: 186
5.12.2 Different types of Franchise Business 186
5.12.3 The Franchise contract: 187
5.12.4 Features /Elements of Franchise 187
5.12.5 Advantage of Franchise 188
5.12.6 Disadvantages of Franchise 189
5.12.7 Difference between Franchising and Licensing 189
5.13 Steps in Setting up a Business Organization 189
5.14 Different Types of Organizational Structure 190
 Chapter
05

Business Organization

Chapter Contents: Opening Case, Introduction, Definition and concept of Business Organization,
Forms of Business ownership in Bangladesh, Characteristics of an ideal form of organization,
Relative position/location of each form of Business ownership, Factors influencing to Choice a
Form of Business Organization, Characteristics of an ideal form of organization, Relative
position/location of each form of Business ownership, Factors influencing to Choice a Form of
Business Organization, Comparative tax liability, assessment and returns of Business,
Branches/liaison/representative of foreign companies, Trust. Joint Ventures, Franchising, Steps in
Setting up a Business Organization, Different Types of Organizational Structure, Exercises.

Learning Goals: After studying this lesson, students will be able to know:

 Different forms of Business Ownership and identify the distinguishing characteristics of

each form.
 Describe the major advantages and disadvantages of each form of Business and factors to
be considered in selecting specific forms.
 Steps to develop business organization that must be conducted.

5.0 Opening Case

Mr. Abir, CEO of click.com talking about business scope and different form of business
organization with his friend Mr. Akash, who is working as General Manager, Finance, of Tadu
Corporation. They are talking about the some people who are thinking to form a new business or
run their existing business. Barna first, Barna initiates and assumes the financial risk of Excel
Manufacturing & Marketing, which is a new enterprise (Barna is an entrepreneur). Then they
talked about the future policy of Sohel and Toky. "Sohel and Toky" decide to go into business,
selling discounted merchandise through their Web site "e-Buy." They sign a partnership
agreement that requires Sohel to contribute $12,000 and Toky to contribute $8,000 in capital to
start the firm. The agreement says nothing about the management of the firm or a division of
profits. In the first year, e-Buy makes a profit of $50,000. Two friends are searching the probable
answer of the following questions. What are the partners' rights with respect to the management
of the firm? Do the partners split the first year's profits? If so, how much is each entitled to?
They did not forget to raise the point of Oli. Oli plans to open name Oli's Pets Store, a pet supplies
outlet, and to hire Queen and Ruhul. Oli will invest only his own money. He does not expect to
make any profit for at least two years and to make almost no profit for the first three years, but he
hopes to expand eventually. Which form of business organization would be most appropriate? In
their dialogue, another consideration got momentum. This is "Marie is considering forms of
business organization for her law firm. One advantage of the limited liability partnership form is
that it allows partners to avoid personal liability for the malpractice of other partners"

Besides these, they also found that Robi, Sunny, and Taib agree to form a computer peripherals
mail-order business. Robi agrees to manage the business and to assume full personal liability.
Suny and Talib agree to invest in the firm but to be liable only to that extent. These three have
formed a limited partnership. Mr. Akash pointed out again, Anu, Palash, Quader, and Sara get
together to finance the building of a shopping mall. Their form of business organization is an
investment group, or a syndicate.

In the last stage, Akash want to share the future plan of the two business named Omega
Corporation and Peak Code. Omega Corporation and Peak Code, Incorporation, two software
firms, wish to combine their research and development capabilities to make a special, limited
edition computer game. The most appropriate legal entity for this project might be a joint
venture. After this, Mr. Abir added that, Molly is considering forms of business organization for
her retail music and video store. For purposes of owning property and being a party to litigation,
the form that is not a legal entity separate from its owner is a sole proprietorship. Finally they
conclude just saying, Farmers in Dinajpur may form a business organization to provide, without
profit, an economic service to its members which is called a cooperative.

5.1 Introduction
Business organization is an act of grouping activities into effective co-operation for specific
objective. It is primarily concerned with the creation and distribution of utilities for earning profit.
There are several ways that a business can be organized to define its structure. The main types of
business organizations in the Bangladesh are sole proprietorship, corporations, partnerships and
limited-liability companies, cooperative and state owned enterprise. Among these sole tradership
is the oldest one followed by partnership, company, state enterprise etc.

Bangladesh follows mixed economic system wherein all business types' organizations are found to
operate side by side. How a business is organized will determine how it pays taxes, accounts for
profit and manages the liability of its owners. So effective cooperation among the various factors
of production will increase the volume of profit of the enterprise. It guides us to the improved
method of organization and operation concerning production, marketing, financing, transporting,
and trading. It restricts wastage of time, material and factory overheads which lower' the cost per
unit. It is to be noted that business organization teaches us all methods and principles of office
organization and the best way of performing the official functions. Business organization, thus
consists of the skilful activities of the businessman with a view to promoting trades, commerce
and industry.
 Figure: Introduction to Business Ownership

Sole proprietorship is the oldest form of business organization, then arrived partnership &
corporations. Soletradership is a form where a person setup it at his own will, bear risk solely &
enjoy benefit. Partnership is an arrangement where two or more persons join together, they pool
resources & split expenses & profits. Corporations called joint stock company pool small savings,
pool in a common capital fund management vested to elected directors; it offers limited liability
to share holders. Since 20th century to the present the legal evolution of partnerships and
corporations progressed rapidly. As income taxation became a significant feature of business
planning in the post 2nd world War. Corporations offered limited liability but imposed the double
taxation. Partnerships did not suffer from double taxation but did not offer limited liability. On the
other hand, cooperative form of business provides limited liability but not free from poor
management. Finally, state owned enterprises have both merits and demerits. Thus, there were
obvious advantages and disadvantages to each form of business organization and there poses a
real and sometimes difficult choice to be made.

The following table represents merits and demerits of each form of ownership of Business
organizations at a glance:

Sl. Nr. Business Type key Advantages key Disadvantages Limited

Liability
1 Sole Simple to set up Limited Growth No
Proprietorship
2 Partnership Relatively Simple No Limited Liability No but Yes, for
Creation, administration Must Have General limited
establishment Law to Partner. Limited partners
govern Partners Cannot
Manage
3 Public Ltd. Legal formality creation Few Owners cannot Yes and
Company & Administration directly control possible
indefinite life time & manage charging order
 Superior Entity in many application
cases
4 Private Ltd Well Established Law to Shareholder Yes
company Govt. Management in Limitations
limited orbit
5 State enterprise Set rules & regulation Blending social & Yes
profit objectives
6 Cooperative Secure credit at a cheep Suffers from the Yes
rate internal injuries and
bickering among their
members.
Table: Merits, demerits and liability pattern of Business Organization

5.2 Definition and concept of Business Organisation

Proper formation of something is organization. To achieve an objective we need some economic
factors & proper co-ordination of all these factors is called Business Organization. So we can say
that the systematic coordination among the factors of business for achieving business goal is
called Business Organization. Some business factors: Manpower, Raw materials, Machineries.
Capital, Technology, Land etc.

Expert opinions:
According to Professor Haney, "Organization is harmonious adjustment of specialized parts for the
accomplishment of some common purpose or purposes.

Koontz and Donald say, "Organization is structural relationship by which an enterprise is bound
together and the frame work in which individual effort is coordinated".

From above discussion we can identify the following Features of a Business Organization:

1. Collection of different elements and allocate duties

2. Coordinate the factors of production

3. It contains organizations' nature

4. Widen scope

5. It depends on business methods.

However, the nature of business organization is two types like, Micro and Macro. Business
developed by an individual initiatives and single control business is Micro and joint efforts and
collective managed type business is treated as Macro business. From the above discussion, we
found two types of business nature. One is "individual or Micro" and another one is "Universal or
Macro".

 Individual or Micro Business Organisation: It includes all sole tradesrship and direct
service related business because their appeal and scope of operations are very limited.
 Universal or Macro Business Organisation: On the other hand Partnership, Joint Stock
Limited Company, State owned enterprises and Cooperative Business are universal in
nature. They derive from legal aspect and collectively managed.
5.3 Forms and structures of Business ownership in Bangladesh:
Characteristics of various firm ownership types have gained increasing attention among
organizational researchers. The basic premise (advanced) is that ownership type affects firm
processes and outcomes. A business (also known as enterprise or firm) is an organization involved
in the trade of goods, services, or both to consumers. Business plan and Business model
determine the outcome of an active business operation. There are several ways that a business
can be organized to define its structure. The main types of business organizations in the
Bangladesh are sole proprietorship, corporations, partnerships and limited-liability companies,
Cooperative, and state owned enterprises. Among these soletradership is the oldest one.

Figure: Unincorporated and Incorporated Business

5.3.1 Different forms of business ownership:

a. Sole Proprietorship
b. Partnership
c. Company
d. Cooperative
e. State Enterprise
f. Joint Venture
g. Business Combination
h. Global business
i. Franchise
j. Trust
k. Licensing
a) Sole Proprietorship: Sole Proprietorship is one individual business alone and the most common
form of business structure. This type of business is simple to form and operate, and may enjoy
greater flexibility of management and fewer legal controls. However, the business owner is
personally liable for all debts incurred by the business and can enjoy all profits.

b) Partnership: Two or more persons who are competent agreed to carry on a lawful business
with the object of sharing of profit thereof on a contract basis is called partnership business. The
number of owners or partners in a partnership business is limited by partnership act-1932. The
minimum number of owner is two and maximum is twenty in general business and ten in the
banking business. The partnership business is limited may carry on its business by all partners or
any of them acting for all. The successful working of a partnership business depends on mutual
trust and confidence of its member.

c) Company: A company is an artificial person created by law, having a separate legal entity, with
a perpetual succession and a common seal. It is an association of individual for the purpose of
earning profit. It has capital divided into a number of shares, of which each member possesses
one or more share and which are transferable by its owners.

d) Cooperative: A cooperative is an autonomous association of persons who voluntarily cooperate

for their mutual, social, economic, and cultural benefit. Cooperatives include non-profit
community organizations and businesses that are owned and managed by the people who use its
services (a consumer cooperative) or by the people who work there (a worker cooperative) or by
the people who live there (a housing cooperative). Milk Vita is the suitable example of
cooperative business in Bangladesh.

e) State Enterprise: A state-owned enterprise (SOE) can be either wholly or partially owned by a
government and is typically earmarked to participate in commercial activities. SOE is also known
as government-owned corporations. State-owned entities should not be confused with
companies with stocks that are owned in part by a government body. State-owned enterprises are
common throughout the world. Bangladesh Shipping Corporation by the Bangladesh Government
is the largest shipping company in Bangladesh.

f) Joint Venture: A joint venture (JV) is a business agreement in which parties agree to develop,
for a finite time, a new entity and new assets by contributing equity. They exercise control over
the enterprise and consequently share revenues, expenses and assets. There are other types of
companies such as JV limited by guarantee, joint ventures limited by guarantee with partners
holding shares.

g) Combination: Consolidation or amalgamation is the act of merging many things into one. In
business, it often refers to the mergers and acquisitions of many smaller companies into much
larger ones. Anyway, the act of combining into an integral whole; "a consolidation of two
corporations"; "after their consolidation the two bills were passed unanimously". In Bangladesh,
BSRS and BSB formed new business organization named Bangladesh Development Bank (BDB).

h) Global business: Global business is a term used rarely to describe all commercial transactions
(private and governmental, sales, investments, logistics, and transportation) that take place
between two or more regions, countries and nations crossing the boundary. Usually, private
companies undertake such transactions for profit; governments undertake them for profit and for
political reasons. It refers to all those business activities which involve cross border transactions of
goods, services, resources between two or more nations.

i) Franchise: A franchise is a right granted to an individual or group to market a company's goods

or services within a certain territory or location. Some examples of today's popular franchises are
McDonald's, Subway, Domino's Pizza, and the UPS Store. Franchising, a business method that
involves licensing of trademarks and methods of doing business, such as: Chain store, retail
outlets which share a brand and central management. An exclusive right, for example to sell
branded merchandise, Media franchise, ownership of the characters and setting of a film, video
game, book, etc., particularly in North American usage and Telecom franchise.

j) Trust: A "Trust" is an obligation annexed to the ownership of property, and arising out of a
confidence reposed in and accepted by the owner, or declared and accepted by him, for the
benefit of another, or the owner. The person who reposes or declares the confidence is called the
"Author of the Trust". The person who accepts the confidence is called the "Trustee".

k) Licensing Business: a company sells licenses to other (typically smaller) companies to use
intellectual property (IP), brand, design or business programs. These licenses are usually non-
exclusive, which means they can be sold to multiple competing companies serving the same
market. In this arrangement, the licensing company may exercise control over how its IP is used
but does not control the business operations of the licensee. For example: Piston manufacture
and sales, N.S Auto parts Industries Sdn Bhd, Malaysia has a Technical Licensing and Trade Mark
usage agreement with Sakura Kogyo Co. Ltd., Osaka, Japan, who are one of the top three Piston
manufacturers in Japan.

5.4 Characteristics of an ideal form of organization

An ideal form of business organization has different salient feature that makes it different from
others. Important some characteristics are mentioned below:

1. It should be easy to form with least expense and a minimum of legal formalities.

2. There should be facility to raise the required amount of capital.

3. the liability should be limited only up to the amount of capital agreed to be contributed by
the owners.

4. There must be flexibility and adaptability in its operations.

5. The organisation should have stability over a period of time.

6. There must be direct relationship between ownership, control and management.

7. The organisation should be such that it does not attract too much state regulation and
control.

5.5 Relative position/location of each form of Business ownership (Which is the best
type of business organization?)
1. Sole Proprietorship: A sole trader ship business is profit owned and operated by an individual
acting as the sole owner. It can be formed anywhere with an optimum capital. It's easy in those
firm where prompt action, nondurable product i.e.; agriculture, secrecy can be maintained. For
small firm sole trader ship is suitable. Example: Parlor, Saloon, Grocery shop etc.

2. Partnership Business Organization: Limited or sole tredership & split of cooperation gave rise
to the formation of partnership. A general partnership is an association of two or more persons to
carry on a business for profit as co-owners and is characterized by a community of interest in a
particular business and a sharing of profits. Partnership business is suitable where larger capital, a
number of employees, efficient innovative entrepreneurs required than sole trader ship.
Partnership is suitable for export import business, wholesale, super mall (retailer).

3. Company Organization: Company required more capital, more risk, a number of director than
partnership business. Company means a company formed and registered under this act or an
existing company to earn profit. Company is suitable for mass production, set up an industry,
factory & distribution business.

4. Cooperative Business: Cooperative is an association of individual to secure a common

economic goal by honest means. Concentration of wealth in few hands, exploitation of workers by
giant enterprises and their owners etc. gave augment to sense of cooperative. "Unity is strength"
that is mutual assistance among poor of weaker class- this imprison gave rise to the growth &
development of cooperative society.

5. State Enterprise: State enterprise is the operation of commercial or industrial undertaking by

the state. A number of factors like, some sensitive products and services, reduction ethnic &
regional disparity, the desire of political party in power of control economic, reduction of rural
urban imbalances, providing more basic services as water, power, communication etc. are seen as
socio-economic factors that give rise to establishment of state enterprise. For instance, weapon,
utility services, hard drinks etc.

6. Business Combination: Combination means integration of organization to achieve a common

purpose. It is suitable in severe competition & threat to existence ensure economy, use of
improved technology, developed transport, advanced research and so on. Its objective is
advantage of large scale business.

7. Global Business: Technology is shrinking our world into a smaller, easier place to do business
and is fundamentally reshaping our lives. There are various reasons why forming and going global
is advantageous for existing company. Such as, Increases sales and profits (especially if fixed costs
are tied to domestic operations), Earns a greater return from a set of core competencies,
Generates economies of scale in production, Enhances local competitiveness and paves the way
to larger and more lucrative customers, Insulates seasonal domestic (local) sales by finding new
foreign markets and selling excess production capacity, Creating jobs, productivity growth, and
wealth, reduce costs through global outsourcing and decrease dependency on existing markets.

5.6 Factors influencing to Choice a Form of Business Organization

A business enterprise be able to owned and organized in several forms. Each form of organization
has its own merits and demerits. The ultimate choice of the form of business depends upon the
balancing of the advantages and disadvantages of the various factors and forms of business. The
right choice of the form of the business is very vital because it determines the power, control, risk
and responsibility of the entrepreneur as well as the division of profits and losses. Being a long
term dedication, the choice of the formation of business should be made after considerable
thought and deliberation.

The choice of the formation of business is governed by several factors:-

a. The nature of business: It is the most important factor. Businesses providing direct services like
tailors, restaurants and professional services like doctors, lawyers are generally organized as
proprietary concerns. While, businesses requiring pooling of skills and funds like accounting firms
are better organized as partnerships. Manufacturing organizations of large size are more
commonly set up as private and public companies.

b. Size of operations: The volume of business (large, medium, small) and size of the market area
(local, national, international) served is the key factors. Large scale enterprises catering to
national and international markets can be organized more successfully as private or public
companies. Small and medium scale firms are generally set up as partnerships and proprietorship.
Similarly, where the area of operations is wide spread (national or international), company
ownership is appropriate. But if the area of operations is confined to a particular locality,
partnership or proprietorship will be a more suitable choice.

c. The level of control: A person, who desires direct control of business, prefers proprietorship,
because a company involves separation of ownership and management.

d. Amount of capital: It is key factor of business and required for the establishment and operation
of a business. A partnership may be converted into a company when it grows beyond the capacity
and resources of a few persons.

e. The volume of risks: Risks and liabilities as well as the mentality of the owners to bear risk, is
also an important consideration.

f. Comparative tax liability: Comparative tax liability, assessment and returns of Business.

5.7 Comparative tax liability, assessment and returns of Business:

If your company or organization is liable for Corporation Tax, you have to do more than just pay
the correct amount of Corporation Tax each year. What you need to do depends on whether your
company or organization is 'active or not. Anyway, A self Assessment Tax return is a business tax
return which allows all taxpayers to make their own assessment of their business and report their
taxable income for the relevant tax period covered by the business, with permitted deductions
and exemptions and calculations for their tax liability payable or net loss for the year. The
principles of charging income tax on Business organization are as follows:

Business Entity types business Taxation The more a taxpayer earns the
separate from more he should pay" is the basic
owners? principle of charging income tax
Sole Proprietorship No Income/loss Stays in the taxable territory for
reported by 182 days or more in the income
owners year (As a resident), will pay the
tax and Non-resident except a
Bangladeshi non-resident has to
 pay tax at the maximum rate of
25%, irrespective of total income.
Partnership No No Do
Income/loss
reported by
owners
Company Yes Income loss/ A Company is obliged to submit
reported by income tax return by fifteenth
owners day of July next following the
income year. Return filed under
Universal Self Assessment is of
course subject to audit.
Table: Imposing Income Tax on Business Organization

5.8 Branches/liaison/representative of foreign companies

a) Description: A company expands its business by opening up its branch offices in various parts
of the domestic country as well as in other countries. A branch office refers to an establishment
which carries on substantially the same business and activity as is carried out by its Head Office.
Branch offices help in expanding the size of the market for a company's product by attracting
more customers; widening the scope of its trading and manufacturing activities as well as bringing
more opportunities and opening unexplored avenues for it. Thus, these offices help to fuel the
growth of the company and enhance its profitability on a sustained basis.

The activities of Branch/Liaison/Representative office of a foreign entity shall remain confined to

those as set forth in the permission of BOI. The said offices shall strictly follow the foreign
exchange regulations of the government of Bangladesh. Generally, no outward remittance of any
kind from Bangladesh sources by the said offices is allowed except the cases permitted by the
foreign exchange regulations. The Branch/Liaison/Representative office of a foreign entity shall
have to be submitted income tax return to the competent income tax authority of Bangladesh.
Security clearance is required to be obtained from Ministry of Home, government of Bangladesh.
Such offices shall have to bring inward remittance at least USD 50,000 within 2 (tow) months from
the date of the issue permission letter as establishment cost and 6 months operational
expenses.

b) Principal Legislation

 The Investment Board Act, 1989;

 Rules & Regulations of Board of Investment (BOI);
 The Companies Act, 1994;
 The Foreign Exchange Regulation Act, 1947

c) General Requirements to Open Branch/Liaison/Representative Office of Foreign Companies

Foreign companies that are not registered in Bangladesh can set up a place of business in
Bangladesh in the form of a Branch Office or a Liaison Office. An investor can close a Branch
Office/Liaison Office/ Representative Office in Bangladesh by an application with audit report,
updated tax payment certificate, NOC from Bangladesh Bank etc. and required formalities with
RJSC shall have to be performed. An investor can change the address of a Branch Office/Liaison
Office/Representative Office in Bangladesh by an application with certified copy of rent deed and
board resolution supported by a treasury chalan of specific amount. For to waiver the condition
of BOI Branch Office/Liaison Office/Representative Office the company has to apply for the
specific condition to waive in BOI.

d) Board of Investment (BOI)

Permission will be required from the BOI in order to open up a Branch Office and shall submit
application in the prescribed form along with the following documents:

 Prescribed Application From, duly filled in, signed and stamped;

 Memorandum of Association (MOA) and Articles of Association (AOA) of the Principal
Company;
 Certificate of Incorporation;
 Name and Nationalities of the Directors/Promoters of the Principal Company;
 Board Resolution to open a Branch/Liaison/Representative Office in Bangladesh;
 Audited Accounts of the last financial year;
 Proposed organogram of the office;
 List of activities of the proposed office

All papers/documents must be attested by the Bangladesh Embassy/High Commission of the

country of origin. Embassy/High Commission of the applicant's country of origin or Apex Chamber
of Commerce of the country of origin.

e) Bangladesh Bank (BB)

Afterwards, permission is sought from Bangladesh Bank for opening branch/liaison Office in
Bangladesh by foreign entities including airlines, companies, firms under Section 18B of the
Foreign Exchange Regulation Act, 1947.

f) Registrar of Joint Stock Companies (RJSC)

Foreign Companies which establishes a place of business in Bangladesh shall, within one month of
the establishment of the place of business, deliver to the Registrar of RJSC for registration--

a. A certified copy of the charter or statues or memorandum and articles of the company or
other instrument constitution or defining the constitution of the company; and if the
instrument is not written in Bengali or English Language, a certified Penally or English
translation thereof;

b. The full address of the registered or principal office of the company;

c. a list of the directors and secretary, if any, of the company;

d. the name and address or the names and addresses of one or more persons resident in
Bangladesh, authorized to accept on behalf of the company service of process and any
notice or other document required to be served on the company;

e. the full address of the office of the company in Bangladesh which to be deemed its principal
place of business in Bangladesh.

5.9 Trusts
a) Description: A "Trust" is an obligation annexed to the ownership of property, and arising out of
a confidence reposed in and accepted by the owner, or declared and accepted by him, for the
benefit of another, or of another and the owner. The person who reposes or declares the
confidence is called the "Author of the Trust". The person who accepts the confidence is called
the "Trustee". The person for whose benefit the confidence is accepted is called the "Beneficiary".
The subject-matter of the trust is called "Trust property" or "Trust-money". The "Beneficial
interest" or "Interest" of the beneficiary is his right against the trustee as owner of the trust-
property; and the instrument, if any, by which the trust is declared, is called the "instrument of
trust". A breach of any duty imposed on a trustee, as such, by any law for the time being in force,
is called a "Breach of trust" And in the Trust Act, 1882, unless there be something repugnant in
the subject or context, "Registered" means registered under the law for the registration of
documents for the time being in force. The main instrument of any public charitable trust is the
trust deed, wherein the aims and objects and mode of management (of the trust) should be
enshrined. The salient features of Trust are as follows:

a. In every trust deed, the minimum and maximum number of trustees has to be specified.

b. The trust deed should clearly spell out the aims and objects of the trust, how the trust
should be managed, how other trustees may be appointed or removed, etc.

c. The trust deed should be signed by both the settlor/s and trustee/s in the presence of two
witnesses.

d. The trust deed should be executed on non-judicial stamp paper, the value of which would
depend on the valuation of the trust property.

b) Principal Legislation

a. The Trust Act, 1882;

b. The Societies Registration Act, 1860;

c. The Companies Act, 1994;

d. The Registration Act, 1908;

c) General Requirements to Set Up a Trust:

i. The application for registration should be made to the official having jurisdiction over the
region in which the trust is sought to be registered.

ii. After providing details (in the form) regarding designation by which the public trust shall be
known, names of trustees, mode of succession, etc., the applicant has to affix a court fee
stamp of specified amount, depending on the value of the trust property.

iii. The application form should be signed by the applicant before the regional officer or
superintendent of the regional office of the charity commissioner or a notary. The
application form should be submitted, together with a copy of the trust deed.

iv. Two other documents which should be submitted at the time of making an application for
registration are affidavit and consent letter.

5.10 Joint ventures

a) Description: Joint venture (JV) is a business agreement in which parties agree to develop, for a
finite time, a new entity and new assets by contributing equity. They exercise control over the
enterprise and consequently share revenues, expenses and assets. There are other types of
companies such as JV limited by guarantee, joint ventures limited by guarantee with partners
holding shares. Therefore, a joint venture is a cooperation formed by two or more separate
entities, usually corporations, which typically allocate ownership based on shares of stock
controlled.

Reasons for undertaking Joint Ventures:

1) To share the risk

2) To generate required binding capacity

3) To reduce the number of competitors

4) To satisfy the customer's desires

5) To give specialized treatment on a job requiring unfamiliar expertise

6) To give an additional source of manpower

7) To give an additional source of supervision

8) To give an additional source of financing

9) To provide more than one estimate of the job for comparison

10) To satisfy local customs and practices and provide local representation on a project in an
unfamiliar area.

b) Principal Legislation of JV

i. The Companies Act, 1994;

ii. The Investment Board Act, 1989;

iii. The Foreign Investment Promotion and Protection Act, 1980

c) General Requirements to Set Up a Joint Venture:

i. Joint venture agreement

ii. Application Form

iii. Trade License

iv. Limited Company:

v. Certificate of Incorporation

vi. Memorandum and Articles of Association

vii. Name and address of other shareholder/director(s) of the project

viii. Additional documents for projects in certain sectors

ix. Copy of rental agreement or lease deed for premises or land purchase document
 x. TIN Certificate

xi. Registration Fee (Bank Draft)

d) Post-investment services by board of investment (BOI)

Once the investor decides to invest and forms a company, BOI provides following Specific facilities
and comprehensive services:

i. Industrial Registration

ii. BEPZA

iii. Recommend for utility connections

iv. Recommendation for Foreign Loan, Suppliers' Credit, deferred payment, Pay Scheme, etc.

v. Recommendation for import of machinery and raw materials.

vi. Issue of work permit.

vii. Remittance of Royalty, Technical Know-How and Technical Assistance Fees

e) Protection of Foreign Investment

The Foreign Private Investment (Promotion and Protection Act 1980) and bilateral investment
treaties ensures the protection of investment form expropriation in Bangladesh. The equity that is
brought in is allowed to repatriate from the country with the dividend earned.

i) Remittance of the equity, dividend and royalty technical assistance

The equity can be remitted while the company decided to exit the country. The dividend earned
each year can be remitted based on the necessary documentation and approval. The royalty and
technical assistance can also be remitted based on the documents and criteria fixed by the
government.

ii) Availability of land for the industrial uses

The land use for the industries can be as under:

A. Export processing zones (EPZ): The land in the EPZ enclaves is allotted by the EPZ
authority.

B. Private lands: The private lands can be scouted by the investors itself. A foreign company
can own land in its name.

C. Government owned land: The investor can seek for govt. owned land (khas land). He can
mention for certain land in a district (regional centre) and can sought support of BOI. BOI
can request the respective Deputy Commissioner (DC), who is the administrative head of
the district, for providing that land.

f) Steps to Start a Joint Venture in Bangladesh

 i. Joint Venture Agreement between the parties

ii. Company Formation or Establishing Place of Business Opening

Liaison/Branch/Representative Office;

iii. Securing Trade License;

iv. Plant Setup;

v. Registering with BOI;

vi. Joint Venture and 100% Foreign Investment proposal in the Private Sector;

vii. Self-financed local investment proposals including industries sanctioned/financed by

financial institutions or commercial banks;

viii. Permission for setting up joint venture industrial units with public sector corporations;

ix. Obtaining Industrial Plot;

x. Registration/Approval for Foreign Loan, Suppliers' Credit, PAYE Scheme etc.;

xi. Obtaining Utility Connection Import of Spare Parts and Raw & Packaging Materials;

xii. Obtaining Work Permit;

xiii. Registration with Factories Act;

xiv. Registration with Environmental Legislation;

xv. Remittance of Royalty, Technical Know-How and Technical Assistance Fees;

xvi. Commercial Operation

g) Problems facing Joint Ventures

To promote and develop a joint venture is not free from any difficulties. It involves some problems
that are categorized by two groups. One is external problems and another one is internal
problems. External problems can be any of the following:

1) Poor written contract

2) Payment delay from the owner

3) Government regulations

4) Work termination

Internal problems are as follows:

1) Poor quality of venture work

2) Delay caused by the venture

3) Poor organization structure of venture

 4) Financial problems of venture

5) Poor communication between parties

6) Inadequate estimation

7) Lack of adequate preplanning

8) Lack of attention and flexibility

9) Lack of policy agreement

10) Foreign venture headquarters are abroad

11) Too much paper work has to be sent to other party for approval

12) Lack of adequate study of partners before financing the joint venture

13) Reaching a decision takes a long time

14) Poor written contract

15) Payment delay from the owner

16) Government regulations

17) Work termination

5.11. 100% Foreign Investment in a Business

Introduction: 100% foreign equity may be allowed in all areas of investment under Companies Act
1994. However, Private investment (local as well as foreign) is restricted in four sectors on
strategic grounds as mentioned in the Industrial Policy-2010.

BOI approval/registration for commercial enterprises

a. For commercial enterprises BOI approval/registration is not needed. They must register under
concern law and proper authority.

b. To understand the effects of globalization and the challenges it presents is assisted through the
use of modern communication technologies and also the ability to expand into newly opening
local markets and exposing them to new methods of production and marketing. However new
challenges often occur, such as the use of managerial insight and intelligence, to examine a
variety of different systems that will be able to compete amongst the already established "local"
competition, which in some markets can prove to be extremely severe. The ability to compete,
hold a strong place in the market and position the company accordingly, can be achieved by the
employment of franchising. This system has an extremely successful track record and allows the
user to ensure the company's prosperity and carry it confidently into the future. One of the
principal tactics in doing business in today's current environment, particularly for SMSs, is
franchising. This method has been improved ever many years through trial and error and has
become a clear concise process.

c. In our country we see a numerous types of business and also numerous brand names. As a
developing country we can hardly consume the most updated product from branded companies.
International trade especially franchising helps in this respect by serving different reputed
branded product at our doors.

d. While working with our Franchising companies we have found many points that must be noted.
In our country we do not have any established law about franchising. Besides, there is no
separate governing body that regulates these sorts of businesses. So, here the franchisees have to
bind with each and every term and conditions set by the franchisor.

e. On the mirror view the franchisor may faces a lot of risks while they permit for franchising here.
Often different companies are seemed to contract for everything but violets some major
principles set by the franchisor. Sometimes they sacrifices quality, size of the product to earn
higher return. Sometimes franchises cares very little about the franchisors' reputation. But
reputation or brand is one of the most important assets for the franchisors. This all happen
because of the lack of our legal guidance. Bureaucracy also hinders the way for this sort of
investment decisions.

5.12 Franchising
5.12.1Franchising concept: A franchise is a right granted to an individual or group to market a
company's goods or services within a certain territory or location. The International Franchise
Association (IFE) defines a full business format franchise as Ð "A franchise operation is a
contractual relationship between the franchisor and the franchisee in which the franchisor offers
or is obliged to maintain continuing interest in the business of the franchisee in such areas as
know-how and training, wherein the franchisee operates under a common trademark, format or
procedure owned or controlled by the franchisor, under which the franchisee has or will make a
substantial capital investment in his business from his own resources."

Figure: Franchisor Firms

Example: Transcom Foods Limited (TFL) started its journey in 2003 in Bangladesh as a franchisee
of Pizza Hut, the first International Chain Restaurant in Bangladesh, and the franchisee of
Kentucky Fried Chicken (KFC) in the year 2006. Both Pizza Hut and KFC are subsidiaries of the
world's largest restaurant company. In a span of seven years, TFL has opened 4 Pizza Hut and 7
KFC outlets so far throughout the country. Other examples of today's popular franchises are
McDonald's, Subway, Domino's Pizza, and the UPS Store. Many people associate only fast food
businesses with franchising. In fact, there are over 120 different types of franchise businesses
available today, including automotive, cleaning & maintenance, health & fitness, financial
services, pet-related franchises etc.

5.12.2 Different types of Franchise Business

There are four types of franchise business:

a. The Product franchise: In this case the manufacturer uses the franchise agreement to
determine how the product is distributed by the person buying the franchise. A retail
company can be provided with a franchise to distribute, for example, a range of tyres. The
franchisee can utilize the brand name and the trademark owned by the manufacturer to
distribute or sell the car tyres. The owner of the store will pay the manufacturer a
franchising fee or agree to purchase a minimum inventory to sell on to their customers.
The manufacturer gets the income from the purchase of the retailer, and/or the franchise
fee, and the retailer gets the benefit of the brand and experience of the franchisor.

b. The Manufacturing Franchise: The franchisee is permitted to manufacture the products

under license and sell them using the originator's trademark and name. They also get the
benefit of the national advertising of the product they manufacture. The company owning
the product gets the franchise fee and sometimes a fee for every unit sold. Examples
include the food and beverage industry.

c. The Business Franchise Venture: The franchisee purchases and distributes the products
for the franchise owner. A client base is provided by the product owner for the franchisee
to maintain. Vending machines are a classic example of this, where the franchisee
purchases the vending machines and distributes and services them, taking their share of
the machines.

d. Business Format Franchise: This opportunity is very popular, and involves providing the
franchisee a proven business model using a recognized product and brand. Training is
provided by the franchise owner and assistance in setting up the business. Supplies are
purchased from the franchisor and the franchisee pays a royalty fee. Frequently the
franchisor will sell the franchisee the products or raw materials to provide the same
quality of product. Most well known fast food franchises are of this type, and also many
jewellers and other ubiquitous high street names.

5.12.3 The Franchise contract: A franchise contract refers to a legal contract in where a well
established business consents to provide its brand, operational model and required support to
another party for them to set up and run a similar business in exchange for a fee and some share
of the income generated. The franchise agreement lays out the details of what duties each party
needs to perform and what compensation they can expect.
The franchise contract consists of two main parts: 1) the purchase agreement and 2) the franchise
or license agreement. For convenience, occasionally the franchise transaction is split into two
stages. When this happens, some franchise companies have two contracts, one for each stage,
rather than a single contract. While it isn't necessary to have two contracts, it can be the better
method where there is a comprehensive equipment and initial services package.

The purchase agreement of the contract covers:

i. The name and address of Franchisor & Franchisee

ii. The nature of activity.

iii. The geographical territory over which the franchises is given exclusive right delineation of
territory either by maps or postal address be specified .

iv. Name of brand goods & services.

v. The duration of agreement.

vi. The franchise fees / royalties & lump sum payment.

vii. Obligation or franchisee as to maintenance of quality & mode of transaction / operation,

pricing etc.

viii. Obligation of franchisor as to assistance .training finance etc.

ix. The conditions under which Franchiser may sell the business .In most cases, a first refusal
is given .Where, however, sell to third party is allowed it is usually made subject tithe
approval of Franchisor.

x. Nature & mode of monitoring & control.

xii. Termination of Franchise .The termination right can be given to both party under certain
conditions. In case of Franchisor , the conditions may as follows :

(a)Fails to report sale (b) fails to stay open for sufficient time (c) trades in goods which are not
part of contract (d) acts in way which is prejudicial to the reputation of Franchisor, etc.

5.12.4 Features /Elements of Franchise

Franchising is found to have some features or elements, some of which can be identified as
follows:

i. Contractual relationship: there must a contract between franchisor & franchisee which
must be in written.

ii. Use of brand name: the franchisee will sell goods / service in brand name that belongs to
franchisor or associated with them.

iii. Payment of royalty: The franchisee may pay lump sum at first instance & pay regular
royalty on periodic basis for sale of goods or services.

iv. Monitoring & control: Franchisor will have right to monitor the method of operation used
by franchisee & the Franchisor will have the right to control over actives of franchisee
relevant to Franchise.
 v. Sssistance: Franchisor will provide necessary assistance & training to employees &
operation of business of Franchisee.

vi. Right to cancel agreement: As per provision of contract both franchisor & franchisee shall
have right to cancel franchise but actions thereof must follow conditions relevant to
cancellation as written in the agreement.

5.12.5 Advantage of Franchise

Franchise has some advantages. The important ones are as follows:

A. Advantages from the view point of franchisee:

i. He gets ready made products / methods of production.

ii. Gets the advantage of recognized brand product for sale.

iii. Requires less advertisement for product except that of sales center.

iv. Gets assistance of employees /sales man's training.

v. Enjoys benefit of research & development at the cost of Franchisor.

vi. May get loan facility /financial assistance.

vii. Benefits from low start cost.

viii. Enhances sale based on goodwill of brand product.

ix. Gets guidance & supervision of Franchisor.

B. Advantage from the view point of Franchisor :

i. Expansion of business without incurring huge capital expenditure.

ii. Saves running costs.

iii. Gets income from royalty at regular interval.

iv. Gets benefits of local knowledge at Franchisees end.

v. Nation Ð wide or international presence of product can be ensured.

vi. Enjoy benefit of efforts given by franchisee in wide circulation & public awareness.

5.12.6 Disadvantages of Franchise

Franchise business may face some disadvantage, these are now listed below:

A. From the view point of Franchisee :

i. Restrictions as to geographical coverage of sale / operation.

 ii. He becomes subject of extensive monitoring & control.

iii. Regular payment of fees / royalties.

iv. Training & Development of employees depends on the choose & decision of franchisor.

B. From the view point of Franchisor :

i. Possibility of under declare of sale by franchisee & loss of royalty to franchisor.

ii. Problems of quality control leading to loss of reputation of brand product.

iii. Problem of supervision & control.

iv. Franchisees recent to control leading to adverse effect a relationship.

5.12.7 Difference between Franchising and Licensing

For a company looking to expand, franchising and licensing are often appealing business models.

Franchising Licensing
In a franchising model, the franchisee uses Under a licensing model, a company sells
another firm's successful business model and licenses to other (typically smaller) companies
brand name to operate what is effectively an to use intellectual property (IP), brand, and
independent branch of the company. The design or business programs. These licenses
franchiser maintains a considerable degree of are usually non-exclusive, which means they
control over the operations and processes can be sold to multiple competing companies
used by the franchisee, but also helps with serving the same market. In this arrangement,
things like branding and marketing support the licensing company may exercise control
that aid the franchise. The franchiser also over how its IP is used but does not control
typically ensures that branches do not the business operations of the licensee.
cannibalize each other's revenues.

Both models require that the franchisee/licensee make payments to the original business that
owns the brand or intellectual property. There are laws that govern the franchising model and
define what constitutes franchising; some agreements end up being legally viewed as franchising
even if they were originally drawn up as licensing agreements.

5.13 Steps in Setting up a Business Organization

Starting a business involves planning, making key financial decisions and completing a series of
legal activities. These 10 easy steps can help you plan, prepare and manage your business. To set
up any type of business organization one should follow the some steps that are summarized here
as per consequence.

Step 1: Write a Business Plan: Use these tools and resources to create a business plan. This
written guide will help you map out how you will start and run your business successfully. It
also includes the objective of proposed business.
 Step 2: Get Feasibility Study: Justify your proposed business: economically profitable,
commercially viable, technically suitable and socially acceptable.

Step 3: Choice of product: Promoter's ability, market and economic condition, the behavior of
consumers, chance to make money etc. should be considered to choice of product.

Step 4: Market Research: Marketing research is "the function that links the consumers,
customers, and public to the marketer through information. Information used to identify and
define marketing opportunities and problems; generate, refine, and evaluate marketing
actions; monitor marketing performance; and improve understanding of marketing as a
process.

Step 5: Ownership selection: Selection of a form of business ownership (sole tradesrship,

partnership, Company) is the most fundamental as well as most important part of starting a
business. There are several important considerations that plays an important role in this
particular process of starting a business such as, capital, size, location, employee etc.

Step 6: Choose a Business Location: Get advice on how to select a customer-friendly location
and comply with zoning laws.

Step 7: Building, equipment and layout: Factory set up with plant lay out and machinery
arrangements also an important step to setting up a business.

Step 8: Finance Your Business: Find government backed loans, venture capital and research
grants to help you get started.

Step 9: Determine the Legal Structure of Your Business: Decide which form of ownership is
best for you: sole proprietorship, partnership, Limited Liability Company (LLC), corporation, S
corporation, nonprofit or cooperative.

Step 10: Register a Business Name ("Doing Business As"): Register your business name with
your state government.

Step 11: Get a Tax Identification Number: Learn which tax identification number you'll need
to obtain from the NBR and your state revenue agency. Register with your state to obtain a
tax identification number, workers' compensation, unemployment and disability insurance.

Step 12: Obtain Business Licenses and Permits: Get a list of federal, state and local licenses
and permits required for your business.

Step 13: Understand Employer Responsibilities and delegation of authority: Learn the legal
steps you need to take to hire employees and allocation of duties and responsibilities.

5.14 Different Types of Organizational Structure

Organizations are set up in specific ways to accomplish different goals, and the structure of an
organization can help or hinder its progress toward accomplishing these goals. Organizations large
and small can achieve higher sales and other profit by properly matching their needs with the
structure they use to operate. There are three main types of organizational structure: functional,
divisional and matrix structure.
a) Functional Structure: Functional structure is set up so that each portion of the organization is
grouped according to its purpose. In this type of organization, for example, there may be a
marketing department, a sales department and a production department. The functional
structure works very well for small businesses in which each department can rely on the talent
and knowledge of its workers and support itself. However, one of the drawbacks to a functional
structure is that the coordination and communication between departments can be restricted by
the organizational boundaries of having the various departments working separately.

b) Divisional Structure: Divisional structure typically is used in larger companies that operate in a
wide geographic area or that have separate smaller organizations within the umbrella group to
cover different types of products or market areas. For example, the now-defunct Tecumseh
Products Company was organized divisionally--with a small engine division, a compressor division,
a parts division and divisions for each geographic area to handle specific needs. The benefit of
this structure is that needs can be met more rapidly and more specifically; however,
communication is inhibited because employees in different divisions are not working together.
Divisional structure is costly because of its size and scope. Small businesses can use a divisional
structure on a smaller scale, having different offices in different parts of the city, for example, or
assigning different sales teams to handle different geographic areas.

c) Matrix: The third main type of organizational structure, called the matrix structure, is a hybrid
of divisional and functional structure. Typically used in large multinational companies, the matrix
structure allows for the benefits of functional and divisional structures to exist in one
organization. This can create power struggles because most areas of the company will have a dual
management--a functional manager and a product or divisional manager working at the same
level and covering some of the same managerial territory.

Exercises
Multiple Choice Questions:
1. The liability of a sole proprietor is

a. limited b. unlimited

c. definite d. no liability

2. Who takes all the risk of sole proprietorship business?

a. Owner b. Employees

c. Government d. Society

3. Who bring finance in sole proprietorship business?

a. Owner b. Bank

c. Government d. Society

4. Who will give the tax to the government as on owner of a sole proprietorship business?

a. Owner b. Employees

c. Jointly d. Business
5. Sole proprietorship business's existence is depend on

a. government b. owner

c. society d. employees

6. What type of business doesn't maintain complex legal formalities?

a. Company b. Sole proprietorship

c. Partnership d. Corporation

7. Which type of business enjoy all profits by its owner?

a. Sole proprietor b. Partnership

c. Company d. Public limited

8. Trade license is required for

a. Sole proprietorship business b. Private limited company

c. Public limited company d. Co-operative organization

9. Quick decision can be taken by the owner of the organization in case of

a. Partnership b. Sole proprietorship

c. Joint venture d. Company organization

10. What type of business is suitable for every aspect?

a. Sole proprietorship b. Partnership

c. Company d. Joint venture

11. The most oldest form of business is

a. Sole proprietorship b. Partnership

c. Company d. Corporation

12. The business which does not have strong legal procedures to start its function

a. Sole proprietorship b. Partnership

c. Company d. Franchising

13. Nashiha is an artist. She draws new picture, scenario etc. and earned a good reputation in
Bangladesh. To sell its own creation, she opened a small gallery at Chandgaon R/A. What type of
business Nashiha Started?

a. Sole proprietorship b. Partnership

c. Licensing d. Servicing

14. Which is not the feature of sole proprietorship business?

a. Profit sharing b. Direct supervision

c. Direct control d. Direct relationship

15. The goodwill is the property of the

a. Sole proprietor b. Licensor

c. Franchisor d. Government

16. The reason for small scale operation of sole proprietorship business is

a. Minimum capital b. Lack of knowledge

c. Minimum control d. Liberty

17 What is principle factor of partnership business?

a. Profit b. Contract

c. Trust and confidence d. Legality

18. Members in general partnership business is up to

a. 10 b. 20

c. 30 d. 40

19. Partners in banking partnership business is up to

a. 10 b. 15

c. 20 d. 05

20. According to liability the classes of partnership business is

a. 3 b. 2

c. 4 d. 5

21. Partnership business is formulated and implement/enacted according to the Act of

a. 1913 b. 1912

c. 1932 d. 1994

22. The main base of partnership is

a. Goodwill b. Capital

c. Skills d. Contract

23. "Contract is the essence of partnership business". According to partnership Act 1932,
which clauses indicate that?

a. 2 b. 3

c. 4 d. 5

24. The nature of liability of partnership business is

a. Limited by shares b. Unlimited

c. Less than share d. Mutual

25. The deed of partnership business is signed by

a. All partners b. Majority partners

c. 50% partners d. Two partners

26. The registration of partnership business is not

a. Compulsory b. Optional

c. Unnecessary d. Voluntary

27. Those partners who directly contribute in the capital of business and directly take part in
various functions of it is called ordinary or active partner.

a. Ordinary partner b. Quasi partner

c. Dormant partner d. Nominal partner

28. One, who contributes the capital in the organization, takes part in profit or loss of the
organization but doesn't take part directly in partnership business. These partners also have
unlimited liabilities alike direct partners. But they don't require giving any public notice if any one
takes retirement from this business and after the retirement he/she is not liable to any third
party.

a. Dormant or sleeping partner b. Ordinary partner

c. Nominal partner d. Goodwill partner

29. The partner who doesn't only contribute in the business but also run the organization by
his creative and innovative power is called

a. Working partner b. Nominal partner

c. Quasi partner d. Idle partner

30. Partner who doesn't contribute capital or doesn't do any management work of business,
but they allow their "good will" to be used instead of some salary or money is called .... partner.
They are not included either various liabilities alike other general partners.

a. Nominal partner b. Quasi partner

c. Idle partner d. Adhoc partner

31. If any partner after his retirement from business organization doesn't take away the
amount contributed in business as capital or left the amount as a loan to the business
organization is regarded as

a. Nominal partner b. Idle partner

c. Deceptive partner d. Quasi partner

32. .... is a person whose liability is limited to the amount that he has paid to the business.
Liabilities are limited with the amount of capital contributed for them. According to type of
partners can't take part in business management. If there is one or more than one listed partners
in a partnership organization then it termed as limited partnership organization.

a. Limited partner b. Unlimited partner

 c. Optimist partner d. Pessimist partner

33. According to section 28 (1) of partnership Act 1932, if any one not by signing the
partnership contract but expresses himself as partner verbally or introduce himself as a partner
by writing or any exceptional behavior then he/she is considered as

a. Limited partner b. Unlimited partner

c. Quasi partner d. Partners by holding out

34. If the business or partners of business tell any person as their partner and that individual
if remain silent then that particular person is called

a. Limited partner b. Unlimited partner

c. Quasi partner d. Partner by estoppels

35. Three partners including two minors started to do a partnership business. What type of
partnership business it is

a. General b. Volunteer

c. Limited partnership d. Special

36. T.K.R started a partnership business. All have given capital except K.R just contributes his
labor in this partnership business. It is called

a. Nominal partner b. Working partner

c. Idle partner d. Ideal partner

37. Rahim started a business with Noyon. Noyon is moinar at 10 years age. What type of
business it is

a. Sole proprietor b. Partnership

c. Co-operative d. Joint venture

38. Shimul and Kamrul started a flower business at Chowhatta in Sylhet. They treated Naimul
as a partner in their business. But Naimul was remain silent with them. This type of partner is

a. Limited partner b. Unlimited partner

c. Quasi partner d. Partner by estoppels

39. When the partnership is mandatory dissolute

a. Death of a partner b. Partner is corrupted

c. Partner is bankrupt d. Partner is going to retirement

40. A and B started a cloth business at Bosundhara City in Dhaka, Bangladesh. What is the
main base of their business?

a. Contract b. Friendship

c. Relation
41. Trust and confidence Limon and Ahad started a magazine shop at Jamuna future park. If
Sunam, not by signing the partnership contract with them but expresses himself as partner
verbally or introduce himself as a partner by writing or any exceptional behavior then he/she is
considered as

a. Limited partner b. Unlimited partner

c. Quasi partner d. Partners by holding out

Answer:
1. b 2. a 3. a 4. a 5. a 6. b 7. a 8.a 9. b 10. a 11. a 12. a 13. a 14. a
15. a 16. a 17. b 18. b 19. a 20. b 21. c 22. d 23. c 24. b 25. a 26.a 27. a 28. a
29. a 30. a 31. d 32. a 33. d 34. d 35. d 36. b 37. a 38. d 39. a 40. a 41.d

Analytical Questions:

1.) Mr. Akmal purchases Mango from Rajshai and sells the fruits at Riaj Uddin bazaar. He has 60%
owners equity of the total capital and remaining 40% borrowed from his friend. As the
business is perishable in nature, so his business is survived under a risk. Due to lack of
modern ways of collecting like cold for storage the seasonal fruits, he has to bear huge losses.
He is thinking about newly to run a ware house business that is treated as Auxiliaries to trade
(AT). Moreover, he can take different measures against his business risks. Observing this
business environment you are required to answer the following questions.

i. What do you mean by sole proprietorship business?

ii. Explain the major benefits of sole proprietorship business.

iii. What are the ways through which Mr. Akmal can raise funds for the business?

iv. Why should a business warehouse the seasonal fruits when more production is
available in different regional areas of the country?

2) Mr. Sonil, Benil, Tanil and Monil are four friends. They have completed their graduation major
in fashion and design technologies from fine & arts institution in Chittagong University. They
have decided to open a fashion house at Midwest Road in Dhaka. They invested equal capital
in business and made an agreement in this regard. Moreover, Mr. Monil has given his consent
to work as active partner. They also agreed to share the risks and profit according to the deed
of the partnership business. Their business is earning a good rate of return of their
investment. They are also considering to expand their business by using their goodwill in the
field of management. Read the story very carefully and try your best to answer the following:

i. What is partnership deed? What should be the contents of partnership deed?

ii. What do you mean by nominal partner?

iii. Good management approach contributed to earn the success of the venture. Explain.

iv. How does goodwill can help to promote the business of fashion house? Explain.

3. Mr. Malek is a recognised restaurant businessman at Baily Road in Dhaka. His restaurant name
is "Malanch" which serves of tasty dishes for its customers. It supplies two ways, one is spot
delivery in the restaurant another one is home delivery through parcel. Due to reasonable
 price and tasty fooding items locals and service holders prefer the restaurant. He personally
take care the cooking ground, cleanliness of the table, sitting chair and other atmosphere in
the restaurant. He takes all risks and enjoys earning.

a. What type of business Malek is doing at Baily Road?

b. What are the major objectives of sole proprietorship business?

c. Explain the key issues you have found for his success in business.

d. Write down the salient features of Sole Tradership business.

e. List the importance of goodwill to be successful in business.

4) A and B (the parties) are two companies in the construction industry. Contractual arrangement
to work together for the purpose of fulfilling a contract with a government for the design and
construction of a road between two cities. The contractual arrangement establishes joint
control. A and B set up a separate vehicle (Z) through which to conduct the arrangement. The
main feature of entity Z's legal form is that the parties, not entity Z, have rights to the assets,
and obligations for the liabilities, of the entity. The contractual arrangement between A and B
additionally establishes that: the rights to all the assets needed to undertake the activities of
the arrangement are shared by the parties on the basis of their participation in the
arrangement; the parties have several responsibility for all operating and financial obligations
relating to the activities of the arrangement on the basis of their participation shares in the
arrangement; and the profit or loss resulting from the activities of the arrangement is shared
by A and B on the basis of their participation shares in the arrangement.

i. What are the differences between Joint venture and Joint Operations?

ii. Do the parties have rights to the assets and obligation for the liabilities?

iii. Do the parties have contractual rights to the assets and obligation for the liabilities?

iv. Is the arrangement design depends on the parties for settling liabilities?

5) Tanvir an MBA graduate from Kent Business School, UK. His father is a reputed businessman in
Sylhet. He recruited a fashion designer and 20 skilled staffs to start the boutique shop at the
heart of the Sylhet city. He believes in quality not in quantity. He uses quality cotton, fabrics
and others raw facts without compromising cost or expenses. He also opened 2 branches one
in Dhaka another one in Chittagong. The regular sale of his 3 outlets is about 100000 taka per
day of each store. In last year sales amount were only 110000-115000 taka. He has a plan to
open another 20 branches in different prime business locations and 10 branches in USA, UK
and Middle East through Franchise.

a. Why sole proprietorship business is more popular form of business?

b. What are the Major problems to expand sole proprietorship business? Explain.

c. What types of factors contributed to earn success in Tanvir's boutique shop?

d. What is meant by business location? What are the significant characteristics of a

prime business location?

e. What do you understand by Franchise Contract?

6) Raju, Kalu and Saju have opened a business in Barisal. They raised a handsome fund have
invested equal amount of capital from each. According to contract they would share the
profits on their capital ratio. They are committed to establish the business as a brand
organization in Bangladesh.

a. What is limited partner?

b. What are the reasons to dissolve the partnership business?

c. What types of problems they might face in future for their partnership business?

d. Ethics is the key stone of doing business. Explain

Review Questions:

a. What do you understand by Business Organization?

b. Discuss about various business organization of Bangladesh

c. Give a clear description of different business organization's position.

d. What are the considering factors in the choice of specific form of business ownership

e. Explain the influencing factors of Business organizations.

f. Point out the suitable fields of various business organizations.

g. Discuss the historical background of sole proprietorship business.

h. Narrate the merits and demerits of sole proprietorship business.

i. What are the characteristics of sole proprietorship business?

j. Describe the reasons for co existence of sole proprietorship business/small business with
large scale business.

k. State the suitable areas of sole proprietorship business

l Describe sole proprietorship business in Bangladesh.

m. What is meant by Partnership business? Discuss the essential elements of Partnership

business.

n. What is meant by Joint Stock Company? Discuss the characteristics of Joint Stock
Company.

o. Discuss the different types of Joint Stock Company.

p. Define State Owned Enterprise. Name and list the salient features of state owned
enterprise.

q. Discuss the historical background of state enterprise.

r. What arguments do you think are there in favor and against of state enterprise?
 s. Describe the sectors suitable for state enterprise.

t. What is meant by Joint Venture? Discuss important features of Joint Venture.

u. Define Business Trust. Point out the general requirements to set up a business trust.

v. What is Licensing Business? Distinguish between Franchising and licensing.

w. Discuss in brief various Steps in Setting up a Business Organization.

Previous Questions:
1. Discuss the factors influencing to choice a form of business organization. [BBA, CU,2017
2. What are the functions of business enterprises? [[BBA, CU.2014]
3. Do the business enterprises have any social responsibilities? How they could perform
these responsibilities? Explain. [[BBA, CU, 2014]
4. Mention the different forms of business organization. [[BBA, CU, 2018, 20171
5. What is small business? Discuss some unique characteristics of small business
entrepreneur (BRA, CU2015)
6. Enumerate some problems of small business ownership. [BBA, CU,2015]
7. Discuss in which situation a specific form of business is given preference. [BBA, CU,2017
8. What is meant by Franchising? Examine its features and discuss the advantages of
Franchisee both from the viewpoint of franchisor and franchisee. [BBA, CU,2014
9. Explain the functions of production department. [BBA, CU,2015]

References and Bibliography:

1. Enamul Hoque, Introduction to business

2. Doing Business in Bangladesh, M.M.Mahamud and SelimUddin.

3. www.bdyellowbook.com/catalog/Community.../Co_operative_Society/

4. http://www.milkvita.org/information.html

5. www.thefinancialexpress-bd.com/more.php