Question

Please describe two different forms of business organizations. Include in your discussion an advantage and disadvantage of each form.

Answer 1

The following are the two types of business organizations:-

Partnership

A partnership is a form of business organization where 2 or more interested people join together for a common purpose or reason. Each partners make capital contribution to form the business through forms like Cash, property,etc. The Partnership also decides to share the profits or lossess of the business based on the terms established in the agreement. Generally, the partners in partnership include firms, businesses, individuals, etc.

Advantages:-

1.) Since there is more than 1 person involved in the business, the business will have higher capital available to run and establish the business;

2.) Partnership form of business is less regulated. It is easier to start and can be changed to any other form of business without much formalities.

Disadvantages

1.) The losses of the business are not limited only to the partnership but also to the partners. This means, the partners would have unlimited liability . The partners may be targeted in individual capacity to pay off the debts of the business.

2.) Since there are more people involved in a partnership business, there is lack of unity in decision making.

Sole Proprietorship

Sole proprietorship is a form of business under which there is only one owner. It is the simplest form of business . The individual who runs the business is generally responsible for the functioning of the business and to bear the debts/profits/losses of the business. It is generally known as a "One man organization".

Advantages:-

1.) Simplest form of business to establish. Sole proprietorship does not have any complex

2.) The decision making will be quick as the sole proprietor need not consult with anyone else in making business decisions.

Disadvantages:-

1.) Similar to partnership, the sole proprietor has unlimited liability for all the business debts. Incase of any losses, the creditors will have rights to the personal assets of the sole proprietor in trying to recover the debts of the sole proprietor.

2.) The business is not everlasting. In other words, the lifecycle of the sole proprietorship does not last beyond the sole proprietor.

Please let me know if you have any questions or other clarifications via comments. All the best and have a nice day :) !