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CHAPTER ONE

INTRODUCTION

Background of the Study

Nigeria is one of the countries in West Africa with vast population of both human and natural resources for her full development. One of the ways developing countries like Nigeria starts high level development is through the establishment of different types of business organisation that will help the country to channel her resources into productive areas. This means that business organisation can play a major role in the process of transforming an underdeveloped economy like Nigeria into a developed one. Business organisations form the most important aspect of the economy of every developed nation. There are different kinds of organisations such as governmental, religious, charity, trade unions and associations but none of the above mention appears to be as important to the economy as the business organisations, this is because they are closely and generally identified as economic institutions. In most parts of the world, the high value of small scale enterprises in the process of socio-economic development has been well documented, particularly in developing countries. It is now realised that large scale enterprise cannot be alone be expected to play a dynamic role, that they are suppose to play in the rapid growth and development of the economy. (Nwoye, 1994).

Business organisations can therefore be described as an organised effort or activity by a person or a group of persons employing the resources of the environment to produce and distribute goods and services with objective of maximising profit. (Barach,  1977). The major incentive for setting up a business enterprise is the profit motive, There are many entrepreneurs that do not easily recognise that they are established in other to provide some services to the society. In such cases, providing services is the same as creating a customer to achieve whatever objective he may have. A business man or woman must be familiar with event in his or her environment.

Commencing a new business like small scale business in Nigeria and making it grow involves both the science of creation and art of management. It also entails a lot of risk but chances of making it succeed will be better if one understand the problems that will be met and work out as many of them as possible before the business takes off and such Problems includes Failure to plan, skilled manpower, infrastructure, finance, raw materials. Another important consideration for any businessman and woman is the decision to know about the form of business organisation to adopt. Basically there are three forms of business ownership, we have the single proprietorship, partnership and corporation. Single proprietorship is an enterprise owned by an individual, the owner is the manager, it is commonly found in the areas of retailing firms, professional practice, repair shops e.t.c.   The formation of a small business under single proprietorship does not need any legal formalities, since the business and its ownership are often one and the same. (Nwoye, 1994). Partnership is a form of business organisation owned by two or more persons by voluntary arrangement. As is sole proprietorship, partnership is not a separate entity from the owners. The legal requirements in formation of a partnership are also minor in registration of business and securing of a license or permit. (Nwoye, 1994).

Small scale business is any business organisation whose annual turn-over does not exceed five hundred thousand naira (500,000). Its capital includes cost of machinery and equipment which does not exceed six hundred thousand naira and employees not more than fifty workers. Corporation is the most complex type of business organisation both in formation and operation. A business corporation has been described as legal entity having separate life from its owner unlike the two other forms of business organisation, The ownership is represented by shares of stock in the company. Anyone who owns shares in a corporation becomes part owners of the business. To determine which of these three categories of organisations that best describe a particular business organisation, a number of factors are considered such as availability of capital required, ability and experience of owner, difficulty of organisation, degree of control, types of business engaged, the size of the market and even the location. The increasing rate of failure of many small scale business organisations in the rural areas of Edo State, suggest that this kind of business is facing some problems, this situation has prompted this study to wanting to examine both the remote and immediate problems if any that faces this business organisation.