HCS 567 Week 3
Business Organization
HCS 567
Business Organization
Starting any business venture has many challenges. One of the most important decisions to be made to help ensure success is choosing the correct business organization. In order to choose the correct type of organization it is important to understand each type of organization along with the pros and cons for each.
Sole Proprietorship The most prevalent organizational type is the sole proprietorship. Sole proprietorship is usually found among the smaller organizations. It involves one person and in many cases the person and the business are synonymous (Barringer & Ireland, 2010). The sole proprietorship is the low cost alternative in both start up and in maintaining costs. They usually only require a business permit in order to operate. However, the sole proprietorship opens the owner up to increase legal liabilities as the income is reported as personal income and thus usually encompasses the owner’s personal assets. Not only does this type of organization have limited resale value. The sole proprietorship is also noted to have significantly higher hazard rates but also have lower survival rates nationally (Luo & Mann, 2011).
Partnership
For business with two or more owners the decision may be to utilize a general or a limited partnership. The general partnership is not dependent on one person for its successes in fact all the partners have a say in how the business runs and functions as per the partnership agreement (Barringer & Ireland, 2010). This type of organization is similar to the sole proprietorship in that the income is noted on the partners’ personal tax returns as the venture files and an informational tax return only (Barringer & Ireland, 2010). The venture also has limited liquidity. Limited partnership is a modified general partnership with the modification being the addition of two different class of partners, general and limited. This venture is used when attempting to
HCS 567
Business Organization
Starting any business venture has many challenges. One of the most important decisions to be made to help ensure success is choosing the correct business organization. In order to choose the correct type of organization it is important to understand each type of organization along with the pros and cons for each.
Sole Proprietorship The most prevalent organizational type is the sole proprietorship. Sole proprietorship is usually found among the smaller organizations. It involves one person and in many cases the person and the business are synonymous (Barringer & Ireland, 2010). The sole proprietorship is the low cost alternative in both start up and in maintaining costs. They usually only require a business permit in order to operate. However, the sole proprietorship opens the owner up to increase legal liabilities as the income is reported as personal income and thus usually encompasses the owner’s personal assets. Not only does this type of organization have limited resale value. The sole proprietorship is also noted to have significantly higher hazard rates but also have lower survival rates nationally (Luo & Mann, 2011).
Partnership
For business with two or more owners the decision may be to utilize a general or a limited partnership. The general partnership is not dependent on one person for its successes in fact all the partners have a say in how the business runs and functions as per the partnership agreement (Barringer & Ireland, 2010). This type of organization is similar to the sole proprietorship in that the income is noted on the partners’ personal tax returns as the venture files and an informational tax return only (Barringer & Ireland, 2010). The venture also has limited liquidity. Limited partnership is a modified general partnership with the modification being the addition of two different class of partners, general and limited. This venture is used when attempting to
References: Barringer, B., & Ireland, R. (2010). Entrepreneurship: Successfullly launching new ventures (3rd Ed.). Upper Saddle River, NJ: Prentice Hall. Borrington, K. (2010). What 's new in types of business organisation? Teaching Business & Econimics, 14(3), 5-7. Easterbrook, F., & Fischel, D. (1985). Limited liability and the corporation. The Inversity of Chicago Law Review, 89-117. Luo, T., & Mann, A. (2011). High-tech business survivorship: An analysis by organization type. Journal of Business & Economics Research, 9(10), 1-15.