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Advantages and disadvantages of organizational forms in memo

MEMO:

Mr. Baku,
Mr. Hanson.

As you know, there are three primary organizational forms: the sole proprietorship, the partnership, and the corporation. You form the organization according to your financial needs, scope of the business and business capacity.
Advantages: Now let us take the example of Sole Proprietorship. It is the easiest to form. No forms to be filled and without any complications. All that you need is to have a place of your business, adequate finance and clear business objective.
Disadvantage:If anything happens to the proprietor, the business is badly affected or it ends.Another roadblock is lack of finance.All the profit or losses are of the proprietor.

Partnership: They are unincorporated businesses.Partnerships must have at least two shareholders.
advantages:Partnerships have more finance available as the other partner brings in additional funds. Two persons can take better decision than one.
disadvantages:Liability of the partners is unlimited. Either of the partners can end the business.

Corporation:Corporations are the companies incorporated and must mention letters LLC after their name.
Advantages: Being a large organization, it is always involved in big projects needing more finance. It has perpetual continuity.
disadvantage:
A Corporation is allowed to either distribute or retain its profit. This boon may be misutilised also by hiding the losses for a number of years.

Internal Control components include Control Environment, Risk Assessment, Control Activities, Information & Communication and Monitoring.

Solution Preview

MEMO:

Mr. Baku,
Mr. Hanson.

As you know, there are three primary organizational forms: the sole proprietorship, the partnership, and the corporation. You form the organization according to your financial needs, scope of the business and business capacity. All the different forms of organizations have various advantages and disadvantages. Here I am going to apprise you of them and the internal accounting controls.

Advantages:

Now let us take the example of Sole Proprietorship. It is the easiest to form. No forms to be filled and without any complications. All that you need is to have a place of your business, adequate finance and clear business objective. You are master of your own. You have to take your own decision according to your convenience and ease. Decision making is fast. You are the captain of the destiny of your ship.

All you need to do is report your business income and expenses on Form 1040 Schedule C. This is the easiest form of business to set up, and the easiest to dissolve. A sole proprietor is taxed as a single shareholder, a so called single member LLC taxed on a Schedule C.

It is easy to form, run, or manage. You are master of your own. You have to take your own decision according to your convenience and ease. You are the captain of the destiny of your ship.

Disadvantages:

If anything happens to the proprietor, the business is badly affected or it ends.
Another roadblock is lack of finance. As the business grows, the need of finance also increases. Either the business is converted into a partnership or a company, according to the business needs or is wound up. All the profit or losses are of the proprietor.

Other minor things are that proprietor cannot take a holiday, cannot leave the business on others to run, arrange finance to execute the order when a large order is procured.

Partnership:

Now let us switch over to Partnership. They are unincorporated ...

Solution Summary

This solution describes the and disadvantages of organizational forms and accounting internal controls.

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