Three major forms of business organizations - Term Paper Example

One of the single most important decisions that any business operation needs to make is with regards to what specific level of organization you willseek to engage with. Although it may seem as something of a trivial decision, the fact of the matter is that regardless of how profitable a given entity might be, the organizational arrangement can ultimately decide whether or not it’s derives or fails. As a means of defining an understanding these key differentials to a greater extent, the preceding analysis will discuss the differentials that exist between sole proprietorship, partnership, and corporations.

By understanding these differentials and seeking to expound upon the key comparisons and contrasts that they both provide, it is the hope of this author that the analysis will be able to integrate a further level of understanding with regards to how specific business organizational decisions can have a lasting effect upon the level of success that is experienced. The first of these which will be discussed is that of sole proprietorship. Broadly speaking, the sole proprietorship is the fastest and the least expensive means of starting a business.

Naturally, this relatively fast and inexpensive means of business startup is particularly attractive to those owner operators who wish to quickly into the market and exhibit a degree of competition. However, this is not to say that the sole proprietorship is not without its drawbacks (Amato 47). One of the most obvious and often cited drawbacks is with regards the fact that the business owner is directly responsible for any and all business debts. Moreover, should the business failed, the full weight of this debt will then be placed directly upon the shoulders of the owner/operator.

Likewise, a secondary form of business organization is with regards to what is known as a partnership. Like the sole proprietorship, starting a partnership can be defined as relatively inexpensive and somewhat simple. In this way, the majority of the paperwork associate the process is with respect to the partnership agreement in and of itself. One of the main benefits of partnerships have over sole proprietorship is with regards to the fact that within a partnership, partners share were pooled their talents or resources as a means of providing startup money for the endeavor.

Likewise, also comparative to the sole proprietorship, the risk to personal assets is the same; meaning that a high level of direct personal risk exists for each one of the partners in the same way that it would have a directly invested in a sole provider should themselves. By far the most complex business organization that will herein be discussed is that of the corporation. In short, a corporation as a business organization that is granted a charter; thereby giving it unique legal abilities that are usually reserved for the individual.

One of the main reasons why incorporation is oftentimes chosen as a means of business organization is with regards to the fact that liabilities that the business might face are not extended beyond the assets of the given Corporation. In such a way, the individuals who have come together in order to establish the corporation are not personally responsible for whatever debts or liabilities that it might incur during the course of normal business operation. However, it should also be noted that incorporation also poses several distinct disadvantages.

The most obvious of these disadvantages is with regards to the fact that incorporation requires an exorbitant amount of money to affect as well as a great deal of time to set up. Yet another salient disadvantage that has encouraged many individuals to steer clear of incorporation as a means of business organization is with regards to the fact that the corporation is in fact taxed twice. What is meant by this is a corporation is not only tax upon its profits, the individuals who have come together in order to form the corporation are also taxed as employees of this organization.

In such a way, the overall level of profitability that incorporation might make is sometimes lower than that of the partnership or sole proprietorship. One of the most important facts that the reader can hope to take away from such an analysis is with regards to the understanding that there is no right or wrong way to set up a business. Rather, it is incumbent upon the business partner and/work partners to engage in a detailed summary and analysis of the goals and compounded parts of the organization as they see it so that they may determine which specific approach, of the ones which of the spar been listed, best suits their individual needs.

Work Cited Amato, Neil. "Succession Planning: The Challenge Of What's Next." Journal Of Accountancy 215.1 (2013): 44-47. Business Source Premier. Web. 20 May 2013.