21 Sep 10. What Are the Different Types of Business Organisations
In addition to internal structure and business strategy, other characteristics that distinguish the types of business organizations are management characteristics and organizational relationships. In particular, some companies operate independently of legal, strategic and internal structures. These entities are hybrid organizations. This lesson explores the following 3 types of businesses. When an owner`s business grows, they must either hire a manager or take on a partner to solve capital and management problems. Cooperatives provide a structure for business creation in which all members of the cooperative own, control and work together for the company. They share responsibilities equally, make collective decisions based on a single person with one vote and receive equal pay in most cooperatives. The big disadvantage of a sole proprietorship is the unlimited liability of the owner, which means that the sole proprietor is personally liable for all debts of the business. In a sole proprietorship, the owner is the business.
He/she owns all the assets of the business, and if the business goes bankrupt, creditors can force the sale of those assets to cover their debts. The bankruptcy of an owner can financially ruin a sole proprietor. Companies are companies that have been authorized to act as individual entities. When the owner of a business starts his business, he essentially separates his personal responsibility from that of the company. Businesses have many of the rights and obligations that individuals enjoy, such as owning assets, hiring employees and paying taxes. However, they are subject to state regulation with a state-imposed advisory structure and taxation of corporate and personal income. A partnership is a formal agreement between two or more people who agree to run a business together. It can also be set up between two or more companies or between companies and individuals. The partnership agreement clearly defines the amount of powers, potential profits and liabilities to which each partner is entitled.
While partners share the benefits and responsibilities, a partner`s decisions can potentially impact the entire company. This form of business organization is operated by organizations that face problems of multiple responsibilities in the company. Llp or limited liability companies allow partners to keep separate obligations in business. Here, the partners continue to share the benefits, just like a regular partnership company. But unlike ordinary companies, LLP partners can choose the profit-sharing rate themselves. In this form of commercial organization, the minimum number of partners must be two. Once you`ve determined the type of business you want to run, you can choose the form of organization and ownership of the business that best suits your goals. The main types of commercial organization are: iv. Existence of a legitimate business – The business to be carried out by partners must be legal. Any consent to engage in smuggling, black marketing or any other legal activity cannot be qualified as a partnership in the eyes of the law. In this article, we will discuss the types of businesses and forms of business organization to help you choose the best option for your business.
The sole proprietorship is the optimal structure because Peter does not have to worry about entrusting the business to his children and the legal risk of litigation due to the waiver is low. In addition, discover the advantages and disadvantages of each form of commercial organization. An entrepreneur can choose this option if he wants to keep full control of the business. In addition, it is a relatively simple and inexpensive process for starting a sole proprietorship. There are also tax advantages, since the income is considered personal income of the ownerTaxable income refers to the remuneration of a person or company used to determine the tax liability. The total amount of income, or gross income, is used as the basis for calculating the amount that the person or organization owes the government for each tax period. and therefore taxed only once. Finally, there are relatively few regulatory requirements for sole proprietorships. There are three main types of business organizations: sole proprietorship, partnership and corporation.
A “partnership” is an association of two or more people who pool their financial and management resources and agree to continue to operate a business and share its profits. Persons who enter into a partnership are individually referred to as partners and collectively as companies or partnerships. Corporations operated for charitable or non-profit purposes cannot be considered partnerships. Partnerships are among the top 3 forms of business organizations, and their nature is determined by the type of partners involved. The main aspect, depending on the forms of commercial organization decided, are its characteristics. Among the various factors that determine the character of the business are: iii. Profit and Business Sharing – There must be an agreement between the partners to share the profits and losses of the partnership`s business. If two or more people share the income from community property, this is not considered a partnership. Before you decide which form of business organization you want to choose, evaluate your business to determine its more general type of business. Depending on what you`re selling, there are usually three different types of businesses: Usually, people with different skills, abilities, or expertise can team up to start a partnership company in order to continue the business. Business activities such as construction, provision of legal services, accounting and financial services, etc.
can be successfully carried out in this form of commercial organization. LLC is a relatively new type of hybrid business structure that is allowed in most states today. It is designed to provide the limited liability characteristics of a corporation and the tax efficiency and operational flexibility of a partnership.