Organizational Forms

Topics: Corporation, Types of business entity, Types of companies Pages: 8 (2767 words) Published: April 2, 2012
Organizational Forms
A. Explain how at least six of the seven key characteristics listed in the introduction to this task apply to each of the following organizational forms: The goal of this report is to provide the owner of the business with a clear guide to each organizational form as well as how each characteristic applies to each form. A1a. Sole proprietorship

A sole proprietorship is a business form in which one person is the owner of the business. Within this form the owner has no legal ties to the business. Since the individual is the only owner of the business he or she is fully responsibly for all loses and debts, but received all profits after taxes. Some of the advantages of a Sole proprietorship ship include; It is the least expensive form of organization to run, the owner has complete power over the business, although not a great situation, the business can be easily closed if the owners chooses for any reason. Some disadvantages include; the owner is fully and legally responsible for any debt, many high level employees usually don’t seek employment for Sole proprietorship based companies, and could be at a disadvantage in raising any kinds of funds (, 2012) ·Liability- Liability in this form is one of the biggest downsides. Since the owner has full responsibility of everything that goes on, having the right amount of insurance can protect in the even of a lawsuit. ·Income Taxes- Taxes are another huge downside to a Sole Proprietorship. Since you gain from all the profits made, you are also responsible for the taxes since they are self employed based. ·Longevity or continuity of the organization- The owner is this case can determine at any time when to dissolute the organization. Of course if the company is doing well, the best idea would be to remain open. If the company is struggling, it is easier compared to other forms to close the business. ·Control-The owner has total control of a Sole proprietorship. This can mean the owner wants total control or can give control to whomever they want. If they chose to let one person take control of daily operations, the owner has the right to put this into place. ·Profit retention-Like we mentioned, since any Sole proprietorship only has one owner, all the profits are retained. However, if the owner would like a successful business it would be beneficial to share the profits among employees. ·Location-The location of a Sole proprietorship is not as extensive as others forms. Not as many forms will need to be filed. However, it will be beneficially to apply for a federal tax ID. If you plan to move to another state, you will need to register and be required to pay a tax; included in this will be a new business license. You will also be required to a license to sell in that specific state and possibly a zoning permit. A1b. General Partnership

A partnership is an agreement with more than one party that is operating a business. Some advantages of a General partnership may include; more money can be brought into the business and also have a greater chance of raising more funds, each partner can run a specific section or department of the business, and they are easy to form. Some disadvantages may include; all profits must be split between the partners, you may not have ability to make decisions on your own, and the possibility of limitations that can prevent it from growing (, 2009). ·Liability-Within a partnership all parties are responsible and liable for everything. All business assets are owned by the partners. If one of the partners has defaulted on a loan, all the partners’ personal assets can be liquidated. ·Income taxes- All the partners within a General Partnership are not required to pay income taxes. They are however required to file an annual information return for any income, loses, ect. Each partner must include any income on their personal tax return. ·Longevity or...
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