Accountants in Business Organizations - Essay Example

Business Organizations Business Organizations Organization An organization is a system where the owner of the company, along with the management and employees perform business activities in coordination with each other. In some cases, organizations are also referred to as social entities that that are goal oriented, structured and planned through division of labour and effective leadership. In an attempt to make the working of an organization effective, it is vital that a management team that methodically divides the multifaceted tasks among various groups to achieve the organizational objective support the organizational structure. Identifying the organization that suits the profession or business can carry this and making a hierarchical structure that supports employee engagement and communication among the individuals (Rainey, 2009). Sole Proprietorship is the organization places all the liabilities of the business operations as well as finance on only one owner. Sole Proprietorship is not applicable for Molly, Mark and Mary as they are three individuals. In Sole Proprietorship, the risk is attached with only one person as he is tied to the business (Spadaccini, 2007). Corporation is another business organization that is equally unsuitable for the three individuals because it is chartered by the state and consists of a large enterprise where the owners are the major shareholders of the company and cannot be dissolved as in the case of Partnerships (Spadaccini, 2007). Three Type of Organization suitable for Molly Mark and Mary In order to recommend the right business for Molly, Mark and Mary, it is necessary to understand the concepts of the kinds of business organizations. As all three of them have an unequal amount of distribution of cash, they need to make comparisons through tax, liability and the impacts of organizational management in either a corporation or partnership to see which organization would be suitable to carry out business activities. As Sole Proprietorship and Corporation are not applicable for these three individuals, the following three are recommended for them. Business Organization 1: Partnerships Partnership is the organization in which two or more than two people have the share of the ownership of the business enterprise. Unlike the Sole Proprietorship, there is a legal agreement made among the two or three owners as they will most of the decisions taking place within the organization have to be mutually shared, along with sharing profits. All partners are equally responsible to take measures in the organization regarding any discrepancy and can take effective steps to dissolve the partnerships whenever they wish to do so. At the time of crises, partnerships are bound to be broken down if there are any disputes that may result in a huge amount of losses (Spadaccini, 2007). Molly, Mark and Mary can set up a partnership because even though they have an unequal amount of cash but they can decide whatever capital they can contribute at the time of establishment of Partnership. This business is applicable because all the three people can cartel their financial resources into the business of their choice. Moreover, while forming an alliance with the partners all the three of them can take assurance through the lawyer that their interests are safeguarded, providing them equal opportunities. It is also required to have well-established terms and conditions of the partnership based on the fact that when the company would be dissolved they would be entitled to equal distribution of shares, etc. In order to find out if this business would be beneficial for Molly, Mark and Mary the following advantages and disadvantages of Partnership are being examined (Spadaccini, 2007). Advantages 1. Setting up a partnership business is easier as the start-up cost of investing in business will be equally shared between the three partners. 2. There would be equal sharing in the profit as well as management of the assets in the organization. 3. There is a tax advantage at the time when the income that is being generated is low, and the partners can include their share of tax return. 4. This business is profitable for the three associates because rate of profitability is higher and will beneficial for the partner who demonstrates additional skills (Spadaccini, 2007). Disadvantages 1. Any action or decision taken by one partner will have an impact on all the other two partners, as well. All the three will be individually and jointly responsible for the actions taken by either one of them. 2. As there is more than one partner, they would be required to raise funds collectively. 3. In most of the cases where there is a concept of shared decision-making, gives rise to increasing the number of conflicts. 4. Partnerships mostly have a short span of life as either a partner can withdraw himself or it get dissolves when death occurs (Spadaccini, 2007). Business Organization 2: Limited Liability Company (LLC) This business organization is a hybrid between the corporation and partnership. It consists of some features of corporations and also has some agility of the partnership but their foundation is far more intricate than a general partnership. LLC does not have more than two characteristic features of the corporation and it can be dissolved when the members want it but the duration of their time as to be determined when the organization is being established and the papers are being processed (Spadaccini, 2007). Advantages 1. The members of LLC are protected from any personal liability. During any case of prosecution or debt or if any unfavourable decisions taken by a member then their personal assets will be saved. However, this is a limited liability and sometimes members may not be exempted for their wrong decisions. 2. As the start-up costs are less than a corporation, they do not require excessive record keeping and the paperwork to establish the enterprise is also less as compared to a corporation. That is why it would be feasible for Molly, Mark and Mary. 3. Just like Partnerships, there will be equal sharing among the members of the LLC Disadvantages 1. Just like Partnerships, LLC also has a limited life span. When a member decides to leave an LLC, then other members will have to close the business after fulfilling their business obligations. Then they will have to establish a new LLC or establish a policy to continue with the LLC if a member decides to quit. 2. As the members of the LLC are considered to be self-employed they will be required to pay their taxes in terms of Medicare and Social Security. The net income of any LLC has to provide this tax bestowed on them (Spadaccini, 2007). Business Organization 3: Cooperatives This business organization is suitable for Molly, Mark and Mary as this business is owned by a group of members. This organization is very rarely used, but it is appropriate in situations where there are more than two members who want to make an association where they pool their assets. Like Molly, Mark and Mary do not know how much distribution of resources they have so they can create a cooperative where they can utilize their assets to reach a common goal as sales of a product or service. In this case, they all want to have a profession of dentistry so it would be feasible for them to adopt this business structure (Kyriakopoulos, 2000). Advantages 1. The biggest advantage for the three members would be that they would own a business and can exercise control over their working. 2. There is a concept of democratic control where every one member is entitled to give one vote only. 3. They also have limited liabilities just like in the case of LLC. 4. Profit will be distributed among the group members equally. Disadvantages 1. Just like in Partnerships, the risk of having conflicts between the members is more. 2. The decision making process is lengthy 3. In order to reach an organizational goal and success, the participation of the all the group members is frequently required. 4. Unlike LLC, Cooperatives require extensive record keeping procedure and there are fewer incentives to devote excessively in capital. Public VS Private Organizations Molly needs to understand the difference between private and public company. The difference between the two is based on the following facts (Vasu et al., 2010) 1. Privately owned company or enterprise has the shares that are privately held. As far as a public corporation is concerned, their shares are mostly traded between the people publically. 2. Private Organizations mostly have their own set of principles and working even though they have to abide by the laws of the state. However, the public organizations are mostly government based and they have to strictly comply with the rules and regulations of the government in terms of working procedures, as well as structure of the organization. 3. Private Companies do not need to present their financial information publically as per their initial agreement drafted on document, whereas, public companies are required to disclose their financial status to the Securities Exchange Commission and have to present the details of their performance at the end of each year. Recommendations to Molly, Mark and Mary A dentistry profession can use a partnership or a corporation kind of organization. However, in the case of Molly, Mark and Mary as they are not aware of the amount of capital they have so it would be feasible for them to adopt partnership as the type of organization because they can invest the whatsoever unequal amount in the company but will get equal profit. In other words, in partnership a person can provide more or less start-up capital to establish their business it will not be a problem for them. However, they are recommended to have a written agreement so that all the partners are bound by the terms of the agreement. Moreover, in terms of a professional business model all the partners can work together to achieve a common goal, understand the strengths and the weaknesses of each other and also inspiring each other. Besides, they can divide their roles one partner can manage the accounts, the other can take care of the staff issues and the third partner can arrange and organize meetings with consultants as well administer training and education in the field of dentistry. This kind of business is most suitable because if they require taking loan, the risk will be shared among them (Willis, 2013). Conclusion As corporations are a large legal entity of their own and consist of many shareholders so it cannot be recommended for Molly, Mark and Mary. Research indicates that true partnerships are commonly used in the Dentistry Profession. It is seen that normally practitioners prefer being an independent body adopting sole proprietorship for the business but in this case as there are three individuals, partnership is recommended so that they can get an equal share. List of References Kyriakopoulos, K., 2000. The Market Orientation of Cooperative Organizations: Learning Strategies and Structures for Integrating Cooperative Firm and Members. Breukelen‎: Uitgeverij Van Gorcum. Rainey, H.G., 2009. Understanding and Managing Public Organizations. New York: John Wiley & Sons. Spadaccini, M., 2007. Business Structures: Forming a Corporation, LLC, Partnership, Or Sole Proprietorship. New York: Entrepreneur Press. Vasu, M.L., Stewart, D.W. & Garson, G.D., 2010. Organizational Behaviour and Public Management, Third Edition, Revised and Expanded. New York: CRC Press. Willis, D.O., 2013. Business Basics for Dentists. New York: John Wiley & Sons. Read More