Question

State the various types of business organizations that exist and explain the distinguishing characteristics of each.

Answer 1

Mainly there are 4 types of organization

1. sole proprietorship - businss run and owned by single person for his own benefit. some of its characterstics are :-

a) 100% profit to owner

b) flexibity in running the business

2. Parterniership - busines owned by 2 or more persons. there are 2 types of partnership : limited and general. In limited partnership, partners limit their liabity on debts according to their investment or ownership written in certificate of partnership. In general partnership, partners are 100% liable to business debt irrespective of their investment in business.

3. Corporation - This is considered as a seperate legal entity of tax pursoses means profts genrates by corporation are taxed as a personal income of entity not of the persons operating entity. dividend and profits given to the shareholders are taxed as personal income of owners.

4. limited liabity company - owners with limitd liability to extent of their investment and agreed share. this is a hybrid company combining characterstics of corporation or limited liability partnership. profits oslimited liabity partnership are shared by owners without double taxation.