Economic Organization

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Economics

Submitted By: John Francis A. Ypil
Submitted To: Francis Arguelles

The term "Business Organization" refers to how a business is structured. The business organization is defined in the bylaws when the business is formed with the name and contact information of those who own and run the company with their roles defined. The bylaws state the purpose of the organization and what it does. A sole proprietorship does not have bylaws because one person owns and controls the business. Capital Mobilization

* The purpose of the firm is to mobilize resources. Put less abstractly, it is to amass capital and use it to fill a specific need. A small firm, filling a market niche, can grow to become a major taxpayer and employer in a region. The firm is structured to make the most of both human and natural resources to both make a profit and serve the local demand. The firm and kindred economic organizations, like banks, are the lifeblood of economic development. Job Creation

* Businesses serve the community not merely by providing needed services or goods, but also in creating jobs and careers. In turn, this creates a group of trained, productive personnel who can serve as the backbone of the local community, serving as an example to others and spending their money in the local economy. Fiscal Policy

* Developing a strong sense of entrepreneurship and small business will discipline the state. If business begins to thrive in an area, developing it economically, the state will benefit through prosperity and high tax receipts as a result. This means that the state will have to behave itself, maintaining sound money, moderate interest rates and predictable legal environments to keep the tax money coming in. In other words, the development of business means that the state must maintain a business-friendly climate locally. A successful business class creates a strata of the population with a vested interest in keeping the state disciplined and well behaved. This can only benefit the community in the long run. Entrepreneurship

* Businesses promote the concept of entrepreneurship. This is the idea that serving the community need not be separate from making money and creating large, centralized creators of wealth. The Federal Reserve Bank of Kansas City is of the opinion that assisting the growth of local, small businesses is the best way to promote entrepreneurship, rather than try to attract established businesses from elsewhere. The bank's argument is that local businesses with roots in the community do better, attract other entrepreneurs and serve as local examples better than "foreign" established firms. Large firms moving into an area can depress economic development by raising barriers to market entry. Small businesses are, conversely, best for sustained, decentralized and locally based development.

Sole Proprietorship

A sole proprietorship is a business organization owned by one individual who controls all aspects of the organization. The organization uses a flow-through tax structure with the owner's social security number to pay taxes instead of having to pay corporate taxes and individual taxes. Some of the advantages of a sole proprietorship are they have low start-up costs compared to other businesses and bookkeeping is simple. The disadvantages include that all the liability falls on the sole proprietor, including his or her personal assets, in the event of a lawsuit. While this type of organization is less expensive to start, it is more difficult to raise capital. ADVANTAGES

An owner of a sole proprietorship gets to keep all profits derived from the operation. The owner may even share any portion of the profits (and losses) with another person or persons. The owner has the authority to make all the decisions relating to the business. Since there are no co-owners, there is no need to hold policy-meeting sessions or form any group similar to a board of directors. The owner, of course, must bear...
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