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Business Finance EBK HEALTHCARE FINANCE: AN INTRODUCTION

Three types of business organization along with their advantage and disadvantage Introduction: Business organization refers to the entity which is formed for carrying out activities as a commercial enterprise to satisfy the needs of the customer and earn reasonable profit from its operation. The common features of business organization are complying with legal regulation, requirement of direction and use of resources, aim to achieve objective and possess a formal structure. The three main type of business organization are proprietorship, partnership and Corporation. Proprietorship is a form of business organization which can organize in an easy manner. The revenue generated out of this type of business organization, whether withdrawn or invested back in the business is taxed as personal income of the business owner. The advantages of proprietorship are lower tax in comparison to corporation that is required to pay high corporate tax and there are very few government regulations that need to be complied with. The disadvantages of proprietorship are difficulty in making large amounts of capital and the life of the business is limited and prevails till the owners are alive. Partnership refers to the form of business organization which is operated and managed by two or more parties and they share profit and loss in the proportion of their capital. The advantages of the partnership type of business organization are taxes to be paid on personal income, easy to form, less risk in comparison to sole proprietorship. The disadvantages are sale of interest is difficult for the partners, difficulty in making large amounts of capital and the owners have unconditional liability against the debt of business. Corporation refers to the legal entity which is distinct and separate from its owners. The rights and responsibilities that are enjoyed by Corporation are similar to what an individual has, such as pay taxes, own taxes, hire employees, sue and be sued and borrow money. The advantage of corporation form of business organization are owners possess limited liability, easy to transfer ownership as it is associated with the stock held by the owner and unlike a sole proprietorship a corporation enjoys unlimited life as it is not tied to a single owner. The disadvantages are high cost of converting business into corporation, Corporations are taxed twice and corporations have an intense paper work.

Three types of business organization along with their advantage and disadvantage Introduction: Business organization refers to the entity which is formed for carrying out activities as a commercial enterprise to satisfy the needs of the customer and earn reasonable profit from its operation. The common features of business organization are complying with legal regulation, requirement of direction and use of resources, aim to achieve objective and possess a formal structure. The three main type of business organization are proprietorship, partnership and Corporation. Proprietorship is a form of business organization which can organize in an easy manner. The revenue generated out of this type of business organization, whether withdrawn or invested back in the business is taxed as personal income of the business owner. The advantages of proprietorship are lower tax in comparison to corporation that is required to pay high corporate tax and there are very few government regulations that need to be complied with. The disadvantages of proprietorship are difficulty in making large amounts of capital and the life of the business is limited and prevails till the owners are alive. Partnership refers to the form of business organization which is operated and managed by two or more parties and they share profit and loss in the proportion of their capital. The advantages of the partnership type of business organization are taxes to be paid on personal income, easy to form, less risk in comparison to sole proprietorship. The disadvantages are sale of interest is difficult for the partners, difficulty in making large amounts of capital and the owners have unconditional liability against the debt of business. Corporation refers to the legal entity which is distinct and separate from its owners. The rights and responsibilities that are enjoyed by Corporation are similar to what an individual has, such as pay taxes, own taxes, hire employees, sue and be sued and borrow money. The advantage of corporation form of business organization are owners possess limited liability, easy to transfer ownership as it is associated with the stock held by the owner and unlike a sole proprietorship a corporation enjoys unlimited life as it is not tied to a single owner. The disadvantages are high cost of converting business into corporation, Corporations are taxed twice and corporations have an intense paper work.

Solution Summary: The author explains the three main types of business organization: proprietorship, partnership, and Corporation.

EBK HEALTHCARE FINANCE: AN INTRODUCTION

EBK HEALTHCARE FINANCE: AN INTRODUCTION

6th Edition

ISBN: 9781567937428

Author: Gapenski

Publisher: YUZU

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What are the three principal forms of business organization? What are theadvantages and disadvantages of each?

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Chapter 1 Solutions

EBK HEALTHCARE FINANCE: AN INTRODUCTION

Ch. 1.1 - Prob. 1.1STQ Ch. 1.1 - Prob. 1.2STQ Ch. 1.1 - Prob. 1.3STQ Ch. 1.1 - Prob. 1.4STQ Ch. 1 - Prob. 1.1STQ Ch. 1 - Prob. 1.2STQ Ch. 1 - Prob. 1.3STQ Ch. 1 - Prob. 1.4STQ Ch. 1 - Prob. 2.1STQ Ch. 1 - Prob. 2.2STQ

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