Forms of Business Organizations

Choosing the form of business to create is one of the most important decisions an enterprise makes. The extent of liability and control the owner will have depends on the form of the business.

Respond to the following in a minimum of 175 words:

• Describe 3 major forms of business organizations and 3 specialized forms of business organizations.
• Describe what you consider to be the top 2 advantages and disadvantages of 1 major form of business organization and 1 specialized form of business organization.

Reply to these two classmate’s statements below whether you agree or disagree. State why and explain. or your faculty member. Be constructive and professional. You will respond in 100 words each statement.

1)Hi Everyone,

The three most common forms of business organizations are sole proprietorship, partnership, and corporation. A sole proprietorship is when a singular individual is the owner of the business. Of the three listed, this one is deemed the most straightforward and requires the least amount of administrative guidance. A partnership is a business owned by two or more individuals. As far as costs goes, this business organization is usually inexpensive, given each party will split the funds. A contract will need to be drawn up to determine how everything is divided amongst the owners. A corporation is a business considered to be a separate entity from its stakeholders. This is the more complex of the three, simply because ownership is determined by shares and can be very expensive.

Three specialized forms of business organizations are cooperatives, joint ventures, and franchises. Cooperatives, otherwise known as a co-op, are business that is owned and operated by its own members. The profits from this business do not go to investors, but to the members themselves (Lumen Learning, n.d.). Joint ventures consists of two or more companies come together to collaborate on a project. Some projects may be too immense for one organization so it benefits both in terms of tackling a common goal and accessing each other’s markets, products, and technology (Lumen Learning, n.d.). Lastly, a franchise is a business organization that allows a franchisee to use a franchisor’s processes and trademarks, allowing the franchisee to sell products and/or services under the franchisor’s name.

Sole proprietorships are relatively easy to start-up and gives complete control to the one who owns the business. On the downside, being able to individually finance a business and see big-time growth sprout from it are some disadvantages. For franchises, there is already a blueprint laid out, which limits risk and the need for experience in order to become a franchisee. Additionally, because the business is already established, management and recognition is bound to be much better. However, given the usage of another company’s likeness and resources, there’s a lack of overall control that a franchisee has, and they can be very expensive to break into, depending upon the franchise.

2)Class, the three major forms of business organization are sole proprietorship , partnership and corporation. Sole proprietorship is a business owned and operated by one individual. It is a simple and most common form of business organization that offers full control to the owner. Partnership, involves two or more people who share ownership of the same business. Each partner contributes resources and shares in profits and losses. Corporation is a separate legal entity owned by shareholders. It provides limited liability protection to its owners but it is more complex to manage compared to the others.

Three specialized forms of business organizations can include a Limited liability Company (LLC) which combines the benefits of a corporations limited liability with the tac efficiencies and operational flexibility of a partnership. There is also an S corporation which is a corporation that elects to pass corporate income, losses and deductions to shareholders for federal tax purposes. Lastly, there is a non-profit organization which is designed for purposes other than generating profit ( supposedly) It is often tax exempt.