Forms of Business Organization
Once you’ve made up your mind and you’re ready to start your own business, you need to decide on what form of organization your business will take. There are three basic forms of Business Organization; you can choose from Single Proprietorship, Partnership and Corporation. In this slide presentation, we will look in to these 3 forms; and determine its implications to your capitalization requirements, what accounting method will you use, and the legal guidelines that might affect your company. It’s crucial to pick the type of organization that will be the most advantageous for your business.
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Forms-of-Business-Organization
1.
2. Once you’ve made up your mind and you’re ready to start your
own business, you need to decide on what form of
organization your business will take.There are three basic
forms of Business Organization; you can choose from Single
Proprietorship, Partnership and Corporation.This will
determine your capitalization requirements, what accounting
method will you use, and the legal guidelines that might affect
your company. It’s crucial to pick the type of organization that
will be the most advantageous for your business.
FORMS OF
BUSINESS
ORGANIZATION
3. 1. Single Proprietorship
Well as you might guess it, a Single Proprietorship is a
form of organization wherein there is only one individual
that bears all the benefits and risks of managing the
business.With the lesser cost and minimal licenses and
permits needed, Single Proprietorship appeals to a lot of
small businesses; it is really the simplest route to start a
business.
4. However, a Proprietorship Business is not considered as a
separate legal entity. So the owner has a personal liability
to the debts of the business. Should the business
experience financial problems, its creditors can get
compensation from the business owner’s personal assets.
The same goes with taxation. In Sole Proprietorship, the
tax due will be derived from your income.
5. 2. Partnership
Partnership is a form of Business Organization between
two or more individuals who came together in common
agreement to share capital, management, profits and
risks of a business. Partnership set up and registration is
also simple and easy.The only difference is if you choose
to have a partnership you and your partners must decide
if you want to have a General or Limited Partnership.
6. A General Partnership is when all the Partners has
unlimited liability to the business just like to a Single
Proprietorship, so a partner can be made liable for
another partner’s debts.
A Limited Partnership on the other hand is a when there
is at least one General Partner who has the greater share
of the business and Limited Partners whose liabilities
depends only on their share in Capital.
7. 3. Corporation
A Corporation is a form of Business Organizations that
declares the business as a separate and legal entity
managed by its shareholders. Legal existence allows the
business the right to enter in trade and in contract; just
like a normal human being. This business setup also
upholds the Corporation to be liable for any obligation or
debts it occurs. So creditors can only exhaust the
resources of the business and never from the
shareholders, should financial burdens arise.
8. A Corporation seems to be the best of all the above
options because, unlike Proprietorship and Partnership,
it has the ability to generate a bigger capital through
shares of stock and it features a Limited Liability
scenario. But it is the most tedious and costly to set up.
Not to mention, corporations are taxed twice. First when
it generates profit and second when dividends are given
to its shareholders.
9. The three forms of Business Organization provides different Advantages and Disadvantages.
As a business owner, you have to assess and see where you can be most comfortable and
what option should be the most advantageous for you, that you can bear the negative
implications that it will give you.
FORMS OF
BUSINESS
ORGANIZATION
10. We're glad to help you!
If you want to learn more about Accounting, check out these
awesome slides here:
TrendStatic Business Solutions is also a Training provider in
Ortigas, Philippines.
Click this link to see our Accounting for Non-Accountants Course
Outline.