Types Of Business Organizations

Types Of Business Organizations

Sole proprietorship

A sole proprietorship is a business controlled and owned by a single person. The business form is suitable for entrepreneurship and small businesses such as artists, local clothes stores, grocery stores, and IT consultants. The proposed business will entail opening a grocery store in the local market. The grocery is selected for various reasons, including little start-up capital requirement. Opening the business will have multiple benefits. They include taking all the business profits that are realized, easy management, few legal formalities needed in setting up the business, and the ability to quit if unsuccessful. However, a considerable risk of owning a loss fully if it occurs is involved.

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Partnership

A partnership is a business form where two or more individuals agree to combine their efforts and resources to create a business and share the profits, losses, and risks. Partnerships include accounting, real estate investment, physician, and law firms. Having an accounting background, I propose to start an accounting consultancy partnership with three of my colleagues. The firm will offer accounting consultancy services at a fee. Opening a partnership is informed by various benefits. First, the business is easy to start because of the fewer legal obligations involved in setting it up. Second, there is better decision-making since the partners consult each other. Finally, the risk is shared among partners and thus acts as a form of diversification. However, a partnership business can be risky due to a lack of independent legal status because of unlimited liability.

Limited partnership

Limited partnerships are similar to the discussed partnership. However, the partners involved in this business have limited liability and cannot be held liable for the business’s debts (Liuzzo, 2021). A limited bookshop partnership is proposed to accommodate one partner with background knowledge of this type of business. Notably, this business is beneficial since partners face limited liability for losses. Further, there is a shared responsibility for work among partners. However, it is worth noting that limited partners lack a say in decision-making compared to general partners. Thus, inconsistency in decision-making may result in disputes that will put the partnership at risk.

Corporation

A corporation is a legal entity with its rights in law. The rights form the basis for various benefits drawn from the business form. A food restaurant corporation proposed to offer multiple products, including pizza and ice cream. The business will benefit from business perpetuity and security, unlike in partnerships. Further, a corporation has better access to owners’ capital and personal liability protection. However, this business form is characterized by rigid formalities, structure, and protocols, which, if not followed carefully, may put it at risk of closure.

Limited Liability Company

A limited liability company is a form of business that entails a corporate structure that excludes owners from being liable for liabilities and debts of the company. A plumbing limited liability company is proposed to tap into a growing plumbing market. The difference between this business and a corporation is that owners can take a role in the management. Unlike a corporation, this business is beneficial for simplicity and flexibility, whereby it can be set up quickly (Meyer et al., 2022). Further, a limited liability company is valuable for allowing owners to participate in the management and thus avoid conflict of interest. However, this form of business faces difficulties in raising capital and, therefore, can fall into financial constraint risks.

References

Liuzzo, A. (2021). Essentials of Business Law (11th Edition). McGraw-Hill Higher Education

(US). https://online.vitalsource.com/books/9781264126507

Meyer, R. E., Leixnering, S., & Veldman, J. (2022). Rethinking the Corporation: Introduction.

In The Corporation: Rethinking the Iconic Form of Business Organization. Emerald

Publishing Limited. https://doi.org/10.1108/S0733-558X20220000078002

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Part of this week’s lecture focused on the different types of business organizations. For your fourth case study, think of a hypothetical business that you would create using each type of organization: sole proprietorship, partnership, limited partnership, corporation, and limited liability company. Explain what each business is and why you chose the type of organization you did. Be sure to list the benefits and risks associated with each organization type.

Types Of Business Organizations

This week’s assignment should be five paragraphs long.

Liuzzo, A. (2021). Essentials of Business Law (11th Edition). McGraw-Hill Higher Education (US). https://online.vitalsource.com/books/9781264126507

Chapters 16-21

04 Weblinks
Federal Guide to Employment Law
This is the federal guide to Employment Law. It details the legal responsibilities that employers must live up to and also some of the occupational health and safety codes that are part of the modern work environment. In addition to spelling out the actual laws and codes that control businesses and their hiring practices, it also details resources and steps that employees can take to secure their rights in court.

IRS Guide to Independent Contractor Law
Independent contracting is a flexible way for businesses to meet their human resource needs. However, this rather loose legal construction presents some significant legal problem. The link below will take you to the Internal Revenue Service’s guide for employees and independent contractors to protect their assets and rights when entering into an independent contractor relationship.

Federal Trade Commission
These are the Federal Trade Commission’s guidelines regarding warranties. They detail every conceivable kind of statement made in warranties and spell out exactly how businesses are allowed to make claims to quality and warranties. This is an in-depth site, but still a helpful resource for the beginning business student.