TYPES OF BUSINESS

INTRODUCTION

It is very important to know about support for small, medium business

in country, types of business, advantages and disadvantages if we want to

found a company. Types of business are not the same inn every country.

Today basic regulations regarding the types and procedures of incorporating

business organizations and performing business activities are found in

different laws and other regulation acts.

My topic objective: to describe types of business in Lithuania and

Great Britain.

Goals:

1. to describe a concept oof business;

2. to speak about types of business organization and

enterprise grouping in Lithuania and Great Britain;

3. to make acquaintance of small, medium business importance,

advantages and disadvantages for Lithuania economic.

Method: literature analysis.

I chose this topic because it seems very interesting for me. I study

administration so it is very urgent for me. I hope this experience will be

useful for my studies. I think it is necessary to know about Lithuania

business for everybody.

CONSEPT OF BUSINESS

Business- eeconomic activities, which is make from production of goods

and commerce. Business is occupation which makes money. Business is

increasing of riches by economic standpoint. Business occupy important

place in a country economic.

Kind of enterprise:

➢ Industrial- when raw materials and materials are buying and

goods are making from it.

➢ Commercial- goods are buying for selling.

➢ Financial- when securities are selling. Object is money or

currency.

TYPES OF BUSINESS ORGANIZATION IN LITHUANIA

Based on the Law on enterprises, the following types of enterprises

may be formed in Lithuania:

1. personal enterprise;

2. general partnership;

3. limited partnership;

4. private stock company (UAB);

5. public stock company (AB);

6. investment company;

7. state enterprise;

8. municipal enterprise;

9. agricultural company;

10. cooperative company.

A personal enterprise may be owned by a single individual or spouses.

The owner’s liability for the obligations of his personal enterprise is

unlimited and generally applies to all of his personal property. The owner

remains liable for the obligations of his personal enterprise even after

its liquidation.

General partnerships are enterprises with unlimited liability

established on the basis of a partnership or joint venture agreement

between several individuals and legal persons. The general partnership is

created through the transfer of property from individual ownership to co-

ownership within the partnership, with the purpose of conducting business

activities under a common name of the firm. All partners are jointly and

severally liable for the obligations of the general partnership. The

general partnership is not liable for the obligations of its partners if

such obligations arise in their activity unrelated to the activities of the

general partnership.

A limited partnership consists of general and limited partners. The

difference between limited and general partnership lies mainly in the

degree of liability of the respective partners. General partners have

unlimited joint and several liability, identical to the unlimited liability

of the partners of the general partnership. The limited partnership has at

least one general and one limited partner.

Private and public stock companies. A stock company is an enterprise

whose authorized capital is divided into shares. The company is liable for

its obligations only to the company’s obligations of its assets.

The minimum authorized capital for a private stock company is

10000litas. The minimum number of shareholders in a private stock company

is one and the maximum number is 100 in a public stock company, the minimum

authorized capital is 150000 litas. The minimum number of shareholders in a

public stock company is one and there are no limitations on the maximum

number of shareholders.

Shareholders of stock companies may be Lithuanian or foreign natural

or legal persons. Each shareholder has such rights in the company that are

inherent to the shares owned.

Shares are securities certifying the participation in the stock

company’s capital and entitling them to certain property and non-property

rights. Shares issued by stock companies are divided according to:

• the manner of disposal- registered shares;

• the rights attached- ordinary and preference shares.

Both private and public stock companies may issue registered shares. Bearer

shares may be issued by public stock companies only. Ordinary shares

constitute the main part of the company’s shares and may be issue by both

private and public stock companies. All ordinary shares must be of equal

nominal value. The total nominal value of preference shares may not exceed

a third of the authorized capital of the company.

Public stock companies are prohibited from introducing any restrictions on

the shareholders’ right to transfer fully paid shares to other persons.

Their shares may be traded publicly.

The Law on Securities Market requires public stock companies to

register their shares with the Securities Commission of the Republic of

Lithuania prior to their circulation. In addition, certain disclosure

requirements are applicable to public stock companies. Securities issued by

public stock companies may be traded either privately or through the stock

exchange. The stock exchange is the only venue for the execution of the

secondary purchase-sale of securities included in the official or current

trading lists of the stock exchange registered in Lithuania.

An investment company is a public stock company whose activities

principally consist oof investing into securities. A special law regulates

the formation and activities of investment companies.

State enterprise- is founding for giving services, which can not give

personal enterprises, agricultural company and stock companies. There is

about 700 state enterprises in Lithuania. State enterprise can promulgate

shares. A foreign investor may own up to 49% of the authorised capital in a

state-owned enterprise. When foreign capital comprises 51% or more of the

authorised capital of the enterprise, it is to be converted into a joint

stock company.

Representative offices of foreign firms, institutions and

organisations in Lithuania are not considered as foreign capital

enterprises. They have the status of natural persons and can carry out a

range of commercial activities as agents for their parent companies.

A Company in Lithuania will be a subsidiary and a foreign enterprise

– a holding company when foreign enterprise obtains more then 50% of voting

shares in Lithuanian company, or a foreign enterprise may obtain a

controlling package of shares and establish a subsidiary which may be

controlled by a holding company and still have an independent legal status.

ENTERPRISE GROUPINGS IN LITHUANIA

The following types of enterprise groupings are provided in the

Lithuanian legislation:

• concerns;

• consortia;

• associations.

A concern is an economic structure that unites independent

companies

related by common interests, agreements on patents and licenses, joint

scientific research and production technology programmes or other close

cooperation. The concern is established through an acquisition of shares in

other companies which results in the creation of a pyramid of companies

with one company at the top.

A consortium, established as a partnership or by a joint- venture

agreement, is a temporary and voluntary grouping of enterprises formed for

the implementation of large projects or to resolve specific issues.

An association of enterprises is a voluntary group of enterprises

with the status of a legal person. The association normally represents the

economic interests of its members and coordinates and executes the matters

brought to its attention by the membership.

TYPES OF BUSINESS ORGANIZATION IN GREAT BRITAIN

The economy can be divided into two sectors: the private sector and the

public sector.

|The Private Sector |The Public Sector |

|Private individuals and firms |Made up of central Government, local |

|that |government, and businesses that are |

|are owned by private individuals |owned by |

|Firms in the private sector |Government; |

|include: |In the last twenty years the number of|

|Sole Traders; | |

|Private Limited Companies (Ltd); |Government-owned firms in the UK has |

|Partnerships; |shrunk |

|Public Limited Companies (PLC). |massively; |

| |Now, very few examples remain, ffor |

| |instance, |

| |the Post Office. |

Other Business Types.

Co-operatives are owned by their staffs, who are ‘members’ of the firm.

Profits are shared amongst the members.

Losses too must be shared.

Franchises.

Many businesses today are franchises.

A business idea is licensed to a franchisee.

The owners of the brand receive a license fee.

The franchisee gains the right to use the business brand.

Not For Profit Businesses.

Many charity-based business organisations are run as ‘not for profit’

operations.

They typically receive donations or funds from groups or government.

Any financial surplus is ploughed back into the business.

The organisation does not aim to generate profits.

SMALL AND MEDIUM-SIZED BUSINESS

ENTITIES IN LITHUANIA

Since the first independence days the Government of the Republic of

Lithuania has pursued the economic development embracing the small and

medium business development. The preparation of the Small and Medium

Business Development Strategy until 2015 shows that the small and medium

business development is an important component of the activities of the

Government of the Republic of Lithuania. For the mid-term period the

following objectives have been foreseen:

➢ To ensure prioritized small and medium-sized business

development;

➢ To encourage integration of the small and medium-sized

business sector into the EU economies;

➢ To increase the competitive ability of small and medium-

sized enterprises (SMEs) providing conditions for the

implementation of innovations and utilization of new

technologies;

➢ To promote international co-operation, exports increase of

goods and services by SMEs;

➢ To complete the establishment of the main components of the

small and medium-sized business sector development, i.e. the

institutional, information and financial support structure

and control.

Having taken into consideration the European Commission Recommendation

of 6 April 1996 concerning the definition of small and medium-sized

enterprises on 22 October 2002 the Seimas of the Republic of Lithuania

adopted a new Law on Small and Medium-Sized Business which came into force

on 1 January 2003. The Law established the definition of small and medium-

sized entities in compliance with the European Commission Recommendation

and the forms of state support to them. The table below provides the

comparison of concept of small and medium-sized business entities effective

prior to 31 December 2002 and from 1 January 2003.

Table 1. The comparison of concept of small and medium-sized business

entities

| |Law On Small And |Law On Small and Medium-Sized |

| |Medium-Sized Business |Business |

| |Development |(effective from 01.01.2003) |

| |(effective until | |

| |31.12.2002) | |

|Small and|Small and medium-sized |Small and medium-sized business |

|medium-si|business entities |entities include medium-sized |

|zed |include mmedium-sized |enterprises, small enterprises |

|business |enterprises, small |(including micro-enterprises) and |

|entities |enterprises and natural |natural persons eligible in |

| |persons having acquired |compliance with laws to engage in |

| |a patent (business |self-dependent commercial, |

| |certificate), for the |manufacturing, occupational or |

| |period of the patent |other similar activities, |

| |validity | including activities having |

| | |acquired a business certificate |

|Medium-si|Enterprise with the |Enterprise complying with these |

|zed |average annual number of|provisions: • less than 250 |

|enterpris|employees on the |employees• annual revenue not |

|e |pay-roll not in excess |exceeding LTL 138 million  or |

| |of 49 |maximum balance value of |

| | |enterprise’s assets being LTL 93 |

| | |million  • being self-dependent* |

|Small |Enterprise with the |Enterprise complying with these |

|enterpris|average annual number of|provisions: • less than 50 |

|e |employees on the |employees• annual revenue not |

| |pay-roll not in excess |exceeding LTL 24 million  or |

| |of 9 |maximum balance value of |

| | |enterprise’s assets being LTL 17 |

| | |million  • being self-dependent* |

|Micro-ent|Individual (personal) |Enterprise complying with these |

|erprise |enterprise whose only |provisions: • less than 10 |

| |employees are the owner |employees• Annual revenue LTL 7 |

| |and his family members |million   or mmaximum balance value |

| |(spouses, parents, |of enterprise’s assets being LTL 5|

| |adoptive parents, |million  • being self-dependent* |

| |children, adopted | |

| |children) | |

The role of small and medium business entities in the national economy.

Small and medium business is very important for country’s gross

domestic product (GDP). The gross domestic product (GDP) is one of the most

important indicators based on which the economic activities’ results

achieved nationally or in a sector are assessed.

The analysis of the gross value added by types of economic activities

produced in the SMEs shows that the biggest gross value added share was

produced in the SMEs engaged in services and trade.

Fig. 8. The gross value added produced by SMEs, by economic activities of

enterprises in 1999-2001 (%)

[pic]

The analysis of the gross value added produced by SMEs in 1999-2001

by legal forms of enterprises makes obvious that the biggest share is

produced by private companies and public companies. In 2001 this indicator

accounted for 68,9%. The role of individual (personal) enterprises and

partnerships is significant in the production of the gross value added. In

2001 the enterprises of these legal forms produced 30,1% of the total gross

value added produced by SMEs. The role of enterprises of other legal forms

in

the gross value added production by SMEs is insignificant.

Revenue.

At the end of 1999 the number of SMEs accounted for 96,6% of all

enterprises operating in Lithuania, however, their revenue from goods sold

and services rendered accounted for only 41,3% of the total revenue of the

enterprises. At the end of 2001 compared to the situation at the end of

1999 having the share of SMEs reduced by 0,8% in the total number of

enterprises, the share of their revenue from goods sold and services

rendered rreduced too. At the end of 2001 the revenue of SMEs made up 31 598

975 thousand LTL and accounted for 39,5% of the total revenue of the

enterprises.

Fig. 27. Revenue of SMEs, by types of activities in 1999-2001 (%)

In 1999-2001 the biggest share of revenue in the total revenue of SMEs

accounted for the revenue of the enterprises engaged in trade though their

share in the total revenue of SMEs decreased. In turn, within the analyzed

period the biggest share of revenue of SSMEs engaged in trade was received

by SMEs engaged in wholesale trade: in 1999 – 56,3%, in 2000 – 58,0%, in

2001 – 57,2% of the total revenue of SMEs engaged in trade.

Within the analyzed period the share of revenue received by

industrial SMEs increased by 0,9% in the total revenue of SMEs. The major

share of revenue in the industries’ sector accounted for the revenue

received by SMEs engaged in production of foodstuffs and beverages: in 1999

– 25,5%, in 2000 – 18,7%, in 2001 – 18,7% of the total revenue of

industrial SMEs. The share of revenue of SMEs operating in the services

sector increased. The data in Fig. 27 shows that in 2001 compared to 1999

the share of revenue of SMEs operating in the services sector increased by

2,3%. The biggest revenue share was received by SMEs providing road and

pipe transport services: in 1999 – 34,2%, in 2000 – 32,6%, in 2001 – 34,7%

of the total number of SMEs providing services.

Both in 1999 and 2001 individual (personal) enterprises and

partnerships accounted for the biggest share of operating SMEs: in 1999 –

74,5%, in 2001 – 63%. However, the analysis of revenue SMEs by legal forms

shows that in 1999-2001 the biggest share of revenue of SMEs was received

by private companies as verified by data in Fig. 28 below.

Fig. 28. Revenue of SMEs, by legal forms of enterprises in 1999-2001 (%)

Thus, the analysis of the data above shows that the SMEs

constituting a big share of all enterprises rreceived a small share of the

revenue which had a tendency to minutely decrease in 1999-2001.

Net profits

In 1999-2001 the changes in net profits of SMEs followed the same

tendencies as all enterprises nationally: in 2000 net profits of all

enterprises including SMEs reduced compared to 1999 and increased again in

2001. The data provided in Fig. 29 below reflect changes in net profits of

SMEs by types of activities.

Fig. 29. Net profits of SMEs, by types of activities in 1999-2001 (%)

Net profitability.

The indicators of net profits and revenue from goods sold and

services rendered by SMEs show net profitability of SMEs. The value of this

indicator is important for SMEs seeking benefits of financial support

through different international programs. The banks adopting decisions

regarding a credit to a SME also compute this indicator.

Fig. 30. Net profitability of SMEs in 1999-2001 (%)

Advantages and disadvantages.

Small and medium business advantages:

• is founding new work places;

• is strengthening national economy;

• it is future big business;

• commercial flexibility;

• is satisfying specifically needs;

• quickest reaction to new-fangled technology;

• financials aspects.

Small and medium business disadvantages:

• is growing expenses of manufacture;

• there is no money for new technology;

• there is no money.

CONCLUSIONS

1. Business- economic activity. Kind of enterprise: industrial, commercial

and financial.

2. There is some types of enterprises which may be formed in Lithuania:

personal enterprise, general partnership, limited partnership, private

stock company (UAB), public stock company (AB), investment company,

state enterprise, municipal enterprise, agricultural company,

cooperative company. Types of enterprise grouping in Lithuania:

concerns, consortia, associations. The economy of Great Britain can be

divided into two sectors: the private sector and the public sector. The

private sector include: Sole Traders, Private Limited Companies (Ltd),

partnerships, Public Limited Companies (PLC).

3. Small and medium business is very important in our country. Small and

medium firms consist about 90% all firms. It makes about 70% gross

domestic product (GDP) of Lithuania. Small and medium businesses

distinguish big flexibility and quick reaction to new-fangled

technology. So it is very important to give big support to small and

medium business in Lithuania.

GLOSSARY

To authorize- to give the power or right to do something;

To arise- to come into being;

Currency- the money (notes and coins) of a country;

To decrease- a growing less;

To engage- to begin to employ;

Expenses- plural money spent in carrying out a job;

To foresee- to see or know about before or in advance.

Guidance- advice towards ddoing something;

Issue- a subject for discussion and argument;

Indicator- a pointer, sign, which indicates something or gives information

about something;

Inherent- forming a natural or inseparable part or quality;

Legislation-the act of legislating;

Manufacture- the process of manufacturing;

Publicity- advertising, the state of being widely known;

Profit- money which is gained in business, from selling something for more

than one paid for it;

To pursue- to follow especially in order to catch or capture, to chase;

Revenue- money which comes to a person from any source or sources;

To resolve- to make a firm decision;

Standpoint- a point of view;

Shareholder- a person who owns shares in a business company;

To venture- to dare (to do something), to risk;

To verify- to confirm the truth or correctness of something;

RESOURCES

• Bagdanavičius J., Sankevičius P., Lukoševičius L. Ekonomikos

terminai ir sąvokos (mokomasis žodynas).- VPU, 1991;

• Lukaševičius K., Martinkus B. Verslo vadyba.- K., 2001;

• Juozaitienė L., Staponkienė J. Verslo vadybos įvadas- ŠU leidykla,

2002;

• Bagdonas E., Kazlauskienė E. Verslo pradmenys, K., 2002.

• Lideika, Petrauskas, Valiūnas ir partneriai Doing business in

Lithuania.

• http:/www.bized.ac.uk