Business organizations are of different type of ownerships. The three most important are proprietorship, partnership and corporation. Each of them has its own advantages and disadvantages. A proprietorship form of business organization is owned by individuals. This form is usually the small scale types of business in the market which can be afforded by single persons. It could be shoe shining business, a shop and many others which are affordable to the individuals. Such business can even be large scale businesses which have been set up by individuals. The advantages which spring up from this form of business are that it s ease of organization and its low cost in organization (Sandrock 2000). It has disadvantages too which are limited source of finances and also that the liability is unlimited.
The other form of business organization is partnerships and it is owned by two individuals. In the market it is likely to find that most of the partnerships are of a larger scale as compared to the proprietorships. However this is not always the case because it is possible to find even small scale business in a market which is owned by two individuals. It could have been that such in partners could not afford the huge amounts of capital that is required to set up such large scale businesses. Such businesses in a market are usually wholesaler shop, transport services and medium scale hotels. The advantages accruing from partnership form of business organizations are the availability of more financial sources and the availability of more sources of managerial skills. It disadvantage is the unlimited liability (Bouchoux 2009).
The third form of business organization is the corporation which is usually a huge business enterprise organized by the state or under federal statutes as a separate legal entity. It is regulated and formed by the laws of a state in some states this law is found in the companies act. The corporation in simpler term is a company and its own legal person and can sue and be sued. An example in a market is a bank which is owned by several individuals.
The most common advantage of a corporation is its ability to obtain large amounts of capital from many sources unlike a proprietorship whose source of capital is the single individual who owns it. The same case goes when we compare a partnership and a corporation. A partnership will obtain its capital from the two individual who have set up the business while the corporation will have many sources through issuance of shares. Taking the example of a bank and comparing it with another form in the market which could be a mini shop we easily find out that the capital which the bank operates is large and from many individuals who are the shareholder. On the other hand when we go out looking for mini shops we find out that such shops are owned by individuals who contribute the capital required to set up the business. There is no issuance of shares and the capital is limited as compared to the banks who publicly invite subscribers to subscribe for the shares (Bouchoux 2009).
Corporations such as banks are also different from other small scale business because once formed through the regulations of statute they became separate legal entities from the owners or the shareholders which is not the case when it comes to the other form of business organizations. This means that since bank is a legal person on its own it can sue and be sued as the bank and not people owning it or the shareholders. This is not the case of the other forms of business organizations which will have its individuals suing and being sued or in simpler terms acting as the representatives of the business and thus the business can’t stand on its own as a legal person (Emerson 2009).
Lastly when it comes to banks which fall under the category of corporations as explained above we find out that the liability of the shareholders is limited and not unlimited like it is in the case of individuals who have partnered in a mini shop business. This means that the shareholders in a corporation are tied to the debt of the business only to a certain extent whereas the owners of a partnership are fully tied to the debts of the organization.
Business organizations are of different type of ownerships. The three most important are proprietorship, partnership and corporation. Each of them has its own advantages and disadvantages. A proprietorship form of business organization is owned by individuals. This form is usually the small scale types of business in the market which can be afforded by single persons. It could be shoe shining business, a shop and many others which are affordable to the individuals. Such business can even be large scale businesses which have been set up by individuals. The advantages which spring up from this form of business are that it s ease of organization and its low cost in organization (Sandrock 2000). It has disadvantages too which are limited source of finances and also that the liability is unlimited.
The other form of business organization is partnerships and it is owned by two individuals. In the market it is likely to find that most of the partnerships are of a larger scale as compared to the proprietorships. However this is not always the case because it is possible to find even small scale business in a market which is owned by two individuals. It could have been that such in partners could not afford the huge amounts of capital that is required to set up such large scale businesses. Such businesses in a market are usually wholesaler shop, transport services and medium scale hotels. The advantages accruing from partnership form of business organizations are the availability of more financial sources and the availability of more sources of managerial skills. It disadvantage is the unlimited liability (Bouchoux 2009).
The third form of business organization is the corporation which is usually a huge business enterprise organized by the state or under federal statutes as a separate legal entity. It is regulated and formed by the laws of a state in some states this law is found in the companies act. The corporation in simpler term is a company and its own legal person and can sue and be sued. An example in a market is a bank which is owned by several individuals.
The most common advantage of a corporation is its ability to obtain large amounts of capital from many sources unlike a proprietorship whose source of capital is the single individual who owns it. The same case goes when we compare a partnership and a corporation. A partnership will obtain its capital from the two individual who have set up the business while the corporation will have many sources through issuance of shares. Taking the example of a bank and comparing it with another form in the market which could be a mini shop we easily find out that the capital which the bank operates is large and from many individuals who are the shareholder. On the other hand when we go out looking for mini shops we find out that such shops are owned by individuals who contribute the capital required to set up the business. There is no issuance of shares and the capital is limited as compared to the banks who publicly invite subscribers to subscribe for the shares (Bouchoux 2009).
Corporations such as banks are also different from other small scale business because once formed through the regulations of statute they became separate legal entities from the owners or the shareholders which is not the case when it comes to the other form of business organizations. This means that since bank is a legal person on its own it can sue and be sued as the bank and not people owning it or the shareholders. This is not the case of the other forms of business organizations which will have its individuals suing and being sued or in simpler terms acting as the representatives of the business and thus the business can’t stand on its own as a legal person (Emerson 2009).
Lastly when it comes to banks which fall under the category of corporations as explained above we find out that the liability of the shareholders is limited and not unlimited like it is in the case of individuals who have partnered in a mini shop business. This means that the shareholders in a corporation are tied to the debt of the business only to a certain extent whereas the owners of a partnership are fully tied to the debts of the organization.
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References
Emerson,R.(2009) Business law(edt 5). United States. Baron Educational Series.
Sandrock,O.(2000)Types of business organizations: factors in choice of entity : procedures of organization. United States. University press.
Bouchoux,D(2009)Business organization for paralegals. United States. Aspen publishers.
References
Emerson,R.(2009) Business law(edt 5). United States. Baron Educational Series.
Sandrock,O.(2000)Types of business organizations: factors in choice of entity : procedures of organization. United States. University press.
Bouchoux,D(2009)Business organization for paralegals. United States. Aspen publishers.
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