What are the three forms of business organization?
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What are the three 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?
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This solution discusses sole proprietorships, partnerships and corporations in 790 words.
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The three types of business organization structures are sole proprietorship, partnerships and corporations. A sole proprietorship is the easiest type of business to start and is owned by only one person. The business and the owner are considered to be one entity under the law and all of the assets of the business are personally owned by the sole proprietor. One advantage of a sole proprietorship is that it is easy to form. As a sole proprietor, you control all of the money made by the business and make all decisions for the business. A sole proprietor has freedom from beauracracy--this means that there is less government control and taxes. Furtherm, you don't have to do a separate tax return for the business and, particularly, you don't have to prepare a balance sheet for the business. On the flip side there are also many disadvantages with this business type. The major disadvantage is that there is unlimited liability--this means that you are personally liable for all debts and actions of the company. Second, it is typically more difficult for sole proprietors to raise operating cash or arrange long-term financing because they have fewer assets. Third, the death, physical impairment, or mental incapacitation of the ...
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