Question

In practice, Business Organizations need finance to operate and attain their strategic objectives. critically identify the various forms of business organizations and explain how each of them raises their finances. Please include references for your answer

Answer 1

The business organizations that exist can be of multiple types such as

a) Proprietorship - In this type of business organization, the proprietor's assets are clubbed with the business assets for most cases. Also business liabilities are also the proprietor's liabilities. Thus raising funds in this case can be done through bank loans or equity funding of investors based on the assets that the proprietor can also pledge as collaterals.

b) Partnership: In this business structure, the partners are the owners of the firm but with regards to liabilities of the firm, the partners are not liable. The partners bring in equity funding and the firm can also raise debt funding through bank loans or debt from investors.

c) Corporation: This type of business structure involves creating a separate legal entity which then have its own assets and liabilites that are separate from those of its owners. This firm can then issue bonds to raise debt capital or it can also take loans from the banks. Moreover, it can also issue equity from the stock market by issuing shares.

References:
Robb, A. M., & Robinson, D. T. (2014). The capital structure decisions of new firms. The Review of Financial Studies, 27(1), 153-179.