Business Organization

Topics: Business law, Types of companies, Corporation Pages: 2 (481 words) Published: March 4, 2013
There are many types of business organizations in the business world. Choosing the form of business organization is a key factor to success of any business organization. There are essentially three basic ways to set up a privately owned enterprise: a sole proprietorship, a partnership, and a corporation. Each form of business organization has its advantages and disadvantages. Sole proprietorship: a business that is owned by one person. Advantages of a Sole Proprietorship

> A sole proprietorship is the least costly and easiest form of business organization to launch and operate. > A sole proprietorship is a business in which the owner is fully and personally responsible for all the obligations of the enterprise. > A sole proprietor is entitled to all the company’s profits and takes complete managerial control. > A sole proprietor is free to make any business decision – what kind of business activities to choose, who to hire or fire, when to take a vacation, when to liquidate his or her business and so on. > There is preferential tax treatment. It means that any profit earned from the business is considered a sole proprietor’s income. Disadvantages of a Sole Proprietorship

> Unlimited liability being the major disadvantage of a sole proprietorship means that a sole proprietor assumes the burden of any losses or liabilities the enterprise faces. > Limited resources refer to the owner’s personal financial resources and his or her ability to borrow. > A sole proprietorship ends with a sole proprietor’s death. Partnership: an unincorporated business organization owned by two or more persons. Advantages of a Partnership

> A partnership is relatively easy and inexpensive to establish. > There are more possibilities in raising funds because the borrowing power of two or more partners is greater. > Each partner can benefit a partnership by his/her knowledge, skills or ideas and specializes in certain activities of the business. > Like a sole proprietorship partnerships...
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