Discuss the comparative study of the forms of business organization.
There are mainly forms of business organisations.
1. Sole proprietorship-The concern that is owned and managed by a single person is called sole proprietorship. In this firm, a single person carries on all the business activities including finance and management. 2. Partnership - Partnership are the firms which are carried on by two or more people who mutually come to an agreement either verbal or written to carry out a business by contributing appropriate capital and share profits in a prescribed ratio. 3. Corporation-Corporations are probably the dominant form of business organization in the United States, with LLCs being one of the most popular. There are a number of LLC formation services you can use to expedite this process. Public corporations are owned by shareholders who elect a board of directors to oversee primary responsibilities. Along with standard, for-profit corporations, there are charitable, not-for-profit corporations
SOLE PROPRIETORSHIP PARTNERSHIP CORPORATION
Advantages Advantages Advantages * Synergy. There is clear potential * Unlimited commercial life. The * Ease of formation and dissolution. for the enhancement of value corporation is an entity of its own and Establishing a sole proprietorship can does not dissolve when ownership resulting from two or more be as simple as printing up business changes. individuals combining strengths. cards or hanging a sign announcing * Greater flexibility in raising capital the business. Taking work as a * Partnerships are relatively easy to form, however, considerable through the sale of stock. contract carpenter or freelance thought should be put into * Ease of transferring ownership by photographer, for example, can establish a sole proprietorship. developing a partnership agreement selling stock. Likewise, a sole proprietorship is at the point of formation. * Limited liability. This limited liability is equally easy to dissolve. * Partnerships may be subject to probably the biggest advantage to * Typically, there are low start-up fewer regulations than corporations. organizing as a corporation. Individual costs and low operational overhead. * There is stronger potential of owners in corporations have limits on * Ownership of all profits. their personal liability. Even if a access to greater amounts of capital. * Sole Proprietorships are typically corporation is sued for billions of dollars, subject to fewer regulations. * No corporate income taxes. Partnerships declare income by filing individual shareholder’s liability is * No corporate income taxes. Any a partnership income tax return. Yet generally limited to the value of their income realized by a sole the partnership pays no taxes when own stock in the corporation. proprietorship is declared on the owner’s individual income tax return. this partnership tax return is filed. Disadvantages Rather, the individual partners * Regulatory restrictions. Corporations declare their pro-rata share of the are typically more closely monitored by Disadvantages net income of the partnership on governmental agencies, including * Unlimited liability. Owners who their individual income tax returns federal, state, and local. Complying with organize their business as a sole regulations can be costly. and pay taxes at the individual proprietorship are personally * Higher organizational and operational responsible for the obligations of the income tax rate. Disadvantages costs. Corporations have to file articles business, including actions of any * Unlimited liability. General of incorporation with the appropriate employee representing the business. * Limited life. In most cases, if a partners are individually responsible state authorities. These legal and clerical business owner dies, the business for the obligations of the business, expenses, along with other recurring dies as well. creating personal risk. operational expenses, can contribute to * It may be difficult for an individual * Limited life. A partnership may end budgetary challenges. to raise capital. It’s common for upon the withdrawal or death of a * Double taxation. The possibility of funding to be in the form of personal double taxation arises when companies partner. savings or personal loans. declare and pay taxes on the net income * There is a real possibility of disputes or conflicts between of the corporation, which they pay partners which could lead to through their corporate income tax dissolving the partnership. This returns. If the corporation also pays out scenario enforces the need of a dividends to individual shareholders, partnership agreement. those shareholders must declare that dividend income as personal income and pay taxes at the individual income tax rates. Thus, the possibility of double taxation.