In: Accounting
Explain in detail with an example Forms of Business Organizations
a) A sole proprietorship
b) A partnership
c) A corporation
Answer:
Forms of Business Organization
These are the basic forms of business ownership:
a. Sole Proprietorship
A sole proprietorship is a business owned by only one person. It is easy to set-up and is the least costly among all forms of ownership.The owner faces unlimited liability; meaning, the creditors of the business may go after the personal assets of the owner if the business cannot pay them.The sole proprietorship form is usually adopted by small business entities.
Advantages :
Disadvantages:
b. Partnership
A partnership is a business owned by two or more persons who
contribute resources into the entity. The partners divide the
profits of the business among themselves.
In general partnerships, all partners have unlimited liability. In
limited partnerships, creditors cannot go after the personal assets
of the limited partners.
Advantages:
Disadvantages:
c. Corporation
A corporation is a business organization that has a separate
legal personality from its owners. Ownership in a stock corporation
is represented by shares of stock.
The owners (stockholders) enjoy limited liability but have limited
involvement in the company's operations. The board of directors, an
elected group from the stockholders, controls the activities of the
corporation.
Advantages:
Disadvantages: