What are the 3 forms of business organization, and what are the advantages and disadvantages of each form? For a corporation, what is the overall goal of the financial manager? Do you agree with this goal? Why or why not?
A business organization is defined as an entity created for the purpose of conducting an industrial or commercial enterprise (“Business organization,” n.d.). The following are the most popular forms of a business organization:
Sole Proprietorship (Brooks, 2013)
Partnership (Brooks, 2013)
Corporation (Brooks, 2013)
Sole Proprietorship is identified as the most popular and simplest form of an individually owned business (Brooks, 2013). There are multiple advantages of a proprietorship:
Easy and inexpensive to establish
Subject to less government regulations
All functions and decisions of the business are administered by the single owner As a proprietorship, the main disadvantages the owner is faced is the challenge of raising financial capital for the business and being responsible for paying all of the incurred bills. This can impact the owner’s personal property and force the selling of the property in order to cover outstanding bills (Brooks, 2013). As a partnership is defined as a business that is owned by more than one individual and has a contract that outlines each party’s obligation, the percent of ownership for each partner, and identify the responsibility of the losses and distribution of profits (Brooks, 2013). The advantages of a partnership include, but not limited to the following:
Greater amount of financial capital is accessible
Multiple individuals brings an array of experience to the business
The income is only taxed once (Zaheer)
Although a partnership has the ability to provide financial comfort to a business, the partners will experience disagreements among themselves, the legal albatross in the event a partner leaves the business or dies (Zaheer). There is also the issue of commingling of the...
References: 3 main forms of business organization. (2013, June 12). Retrieved from http://www.affordablecebu.com/load/business/3_main_forms_of_business_organization/6-1-0-1448
Brooks, R. (2013). Finance management: Core concepts. (2nd ed.). Upper Saddle River: Pearson Education, Inc.
Business organization. (n.d.). In Dictionary.com. Retrieved from http://dictionary.reference.com/browse/Business Organization
Carnes, D. (n.d.). What are the three forms of business organization?. Retrieved from http://www.ehow.com/about_5329595_three-forms-business-organization.html
Definition of a corporation. (n.d.). Retrieved from http://www.irs.gov/Charities-&-Non-Profits/Definition-of-a-Corporation
Zaheer, M. (n.d.). Comparison of three primary types of business organizations. Retrieved from http://www.trcb.com/business/business-startup-basics/comparison-of-three-primary-types-of-business-organizations-222.htm
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