Types of Business Organization

When you start a business, you have many decisions to make. The first is the form of organization best suited to the needs of your business. Most business start as sole proprietorships. Many of them become partnerships or corporations as they expand. You are probably familiar with sole proprietorships, business that are established, owned, operated, and often financed by a single person.

Sole proprietorships have several advantages that make them popular. They are ease and low cost of setting up, all profit go to the owner, control of the business can be performed directly, and from government regulation. Another major form of business organization is the partnership. It is an association of two or more persons to carry on as co-owners of business for profit. Some advantages of partnership come quickly to mind. When you have a partner, you are not tied to the business, as you would be in a sole proprietorship.

Someone else helps manage and operate the firm and brings extra skills. Setting up partnership takes a more formal agreement than starting a sole proprietorship, but partnerships are still quite easy to form.Ease of information, availability of capital, diversity of skills and expertise, flexibility, and relative freedom form government control are the advantages of all types of partnership.

Corporations are not the most popular form of business organization in term of number of firms. But they acccount for the largest share of both sales and income. A corporation is a legal entity with an existence and life seperate from its owners. A corporation can own property, enter into contracts, sue and be sued, and engage in business operations under the terms of its charter. Unlike sole proprietorships and partnerships, corporations are taxible entitles.

There are four types of corporate ownership. The common stock of a privately owned firm is not available to the general public. A closely owned firm belongs to a small group of investors.
The common stock of a publicly owned firm belongs to a broad group of unrelated individual and institutional investors.

Several specialized types of business organization play a role in our economy are co-operative, joint ventures, and limited liability companies.
A co-operative is a legal entity with several corporate features, such as limited library, an unlimited life span, an elected board of directors, and an administrative staff. Unlike a corporation, a co-operative does not keep profit.
Instead, it distributes all profits to its members in proportion to their contribution. Since the co-operative keeps no profit, it pays no taxes.

A joint venture is an entity formed by two or more companies to undertake a special project. there are many reasons for joint ventures. The project may be too large for one party to handle on its own. Another reason for joint ventures is that a company can gain access to new markets, products, or technology by working with a firm whose expertise complements its own.
A new type of business entity is the limited liability company (LLC). This company provides liability protection but is taxed like a partnership.
The combination of limited liability and favorable tax treatment makes the LLC attractive for many types of small business.

EXERCISE:
Put the words in the following list into the blank space of the sentences below.

FINANCE, START, PROVIDE, ESTABLISHED, DISTRIBUTED, EXPAND, FORM, OPERATE, OWN, PERFORM

1. You may have planned to get a job and then ... working in the career of your choice.
2. Sole proprietorship is a ... of business organisation
3. They ... the business on several forms including partnership and joint venture.

4. The company has ... several factories in several location in five cities.
5. You must read the direction for user before you ... the machine.
6. They ... all of the business activity to produce good and services.
7. Managers often ... more than one of the managerial functions.
8. They ... the brochures to all audience in the conference hall.
9. Businesses ... goods and services for consumers.
10. They ... several companies operated by professional managers.