Forms of Business Ownership and Organization

Introduction

This essay considers information about types of business ownership. The main idea of the essay consists in the description of the peculiarities of each organization’s form. It is needed to notice that the choice of a right form of a business organization plays a significant role in the future of the company. The form affects the legal liability of the owners and the organization and income tax treatment. In the work, a short description of such forms of business organizations as sole proprietorship, partnership, corporation, S-corporation, and non-profit organizations is stated. The special attention is paid to corporations, because they are probably dominant among other forms of companies in the USA.

Body

Today businessmen seriously consider distinctions between forms of business organizations. Each of them has its advantages and disadvantages, which can be tax issues, legal issues, financial and various personal concerns.

When one individual is doing business, it is termed as a sole proprietorship (Van Horne & Wachowicz, 2008). Sole proprietorship is the most popular form of a business organization in the USA (Van Horne & Wachowicz, 2008). This is due to the fact that this form is the simplest regarding the processes of formation and dissolution. A large number of big corporations started its business life as small sole proprietorships. The most important advantage is that owners of such organizations keep all the profit. The most daunting disadvantages consist in the unlimited liability for business debts.

The main distinction between sole proprietorship and partnership lies in the amount of owners who share ownership of a single business. The main aspect of partnership business form is the availability of all owners’ legal agreements that describe how decisions will be made, disputes will be resolved, profit will be shared, partners will be admitted to the partnership, and how they will dissolve the business organization when needed (Van Horne & Wachowicz, 2008). Partnership form includes such sub forms as general partnership, limited partnership, limited liability partnership, and joint venture (Van Horne & Wachowicz, 2008).

S-corporations are very similar to partnerships. The number of shareholders cannot be more than 100 persons (Brigham & Houston, 2009). The main specific feature of such organizations is that if the shareholder provides any service in the corporation, the last one pays him a reasonable salary, which is a separate payment from distributions of profits or loses.

Non-profit organization is usually formed for civic, charitable, or artistic goals. It should be noticed that government exempts such types of business organization from federal and state taxation on their income. Such companies have sturdy responsibilities concerning their income, activities, and assets (Brigham & Houston, 2009).

Corporations are probably the dominant organization’s business form in the USA (Brigham & Houston, 2009). A corporation is determined as “a legal ‘person’ separate and distinct from its owners, it holds a large number of the duties, rights and privileges of the actual person” (Van Horne & Wachowicz, 2008). A corporation can have a partnership both with general partnership and limited partnership; furthermore, it can hold own stock in another corporation. This organization’s business type is different from others, as a corporation has a life of its own, and it does not depend on ownership’s changes. This is due to the fact that corporation’s owners and managers are usually different people (Brigham & Houston, 2009). Owners elect the board of directors, who employ the managers. It should be underlined that corporation’s starting is more complicated than starting of sole proprietorship or a partnership. The main peculiarity of this ownership’s form consists in the fact that a corporation borrows money only in its own name (Van Horne & Wachowicz, 2008). Consequently, owners have limited liability for corporate debts.

Conclusion

If to sum up all the plausible information, it should be underlined that each form of business ownership has its advantages and disadvantages that significantly influence the future of the company. An owner should weigh all the pros and cons of each business form when choosing one of them. The main attention of the company’s owner should be concentrated on such matters as taxation, legal liability, management control, and ability to raise finance, transfer ownership, continue business, or dissolve it when needed. It seems that the most simple business form is sole proprietorship, because its start is very easy, while corporation is the most self-dependent business form, since the company’s owners have limited liability.