June 11, 2012
University of Phoenix
As an individual or a group of individuals, starting up any type of business takes strategic planning even before the business opens. Many questions will to be asked once the concept of the business is designed. Each form has its own unique style starting from which type of business organization is decided on, whether it is sole proprietorship or a corporation, to the types of stocks that are available. Businesses today have numerous procedures to follow from start to finish. Following the right protocol of what is expected the business will grow to greater ventures. One thing is certain once a plan is in place and all the decisions are made success can be obtained. Types of Business Organization
There are three types of business organization that could be selected as the basis of a business. Depending on the type of business a person wants to start they will then select the right business for form. The first main type of business is the Sole Proprietorship. This form of business has a single owner. This is the simplest type of business one can set up as there are no formal procedures for setting up a Sole Proprietorship. Many people are Sole Proprietors and do not even know it. A Partnership is also one of the main three types of business entities one can start. This type of business is when two or more people enter into a formal agreement. The capital of the business is formed by the partners who have entered into the formal agreement. They are responsible for the total debts of the firm and who share the profits and losses of the firm. Basically they form a pool of experienced resources and talented employees. Last, there is the Corporation business. The structure of the corporation is different from the other two types of business structures. A corporation has most of the rights and duties of a natural person but with perpetual life and limited liability. Board of Directors is appointed by the shareholders and the officers of the corporation are appointed by the Board of Directors. The officers of the corporation are given responsibility to the run the day-to-day functions of the business. Each structure has its own unique style which benefits the individuals involved. Characteristics of a Corporation
A corporation is an entity separate and distinct from its owners and is created by law, and its continued existence depends upon the statutes of the state in which it is incorporated (Weygandt, Kimmel, & Kieso, p. 534). Corporations have right and privileges that a person would have a business owner except vote and hold a public office. The number of characteristics distinguishes corporations from proprietorship. First characteristic are separate legal existence, as an entity separate and distinct from its owners, the corporation acts under its own name rather than in the name of its stockholders. Second characteristic limited liability of stockholders, the liability of stockholders is normally limited to the investment in the corporation which means creditors cannot lay any claim on personal assets unless fraud is proven in a default of debts. The third characteristic is transferable ownership rights, shares of capital stock give ownership which can be transferred only when each owner agrees. Stock can be sold or transferred at the discretion of each of the stockholders. The fourth characteristic is ability to acquire capital; it is an easy process for a corporation to acquire capital through selling of its stocks to investors. Investor buys stock to earn money over time because prices of stock have the ability to increase from the original purchase price. The capital that a corporation can acquire is unlimited. The fifth characteristic is continuous life which the life of a corporation is stated in its...