Forms of Business Organizations

Business Organizations can be divided into two major divisions: the profitable associations and the non-profitable associations. The profitable associations are set up to make profits from their products or services. Non-profitable associations are business entities which exist for another purpose such as rendering services to the people. Sole proprietorship is under the profitable association. It is a business owned and controlled by a single person. The owner and the operator of a sole proprietorship business is one person only. The controls all the operations and decisions involving the business, and all the profits go to him. A sole proprietorship is not a taxable entity therefore all profits are taxed on the return of the individual.

Partnership is another form of a profitable institution. Partnership is a business that belongs to 2 or more people. Partnerships can be arranged through an oral or written agreement. For small businesses, oral agreements are sometimes arranged, but for formality’s sake, it is best recommended to make written agreements especially for bigger partnerships involving law firms or public accounting firms. Written agreements are more formal and clearly states the responsibilities of both parties involved. A written agreement should also state the division of profits and costs of both parties to avoid confusion and disputes. Any business should develop an accounting system to distinguish private and business affairs that may affect the status of the business.

A corporation is another profitable institution that is arranged under the laws of a specific state. A corporation needs a lot people involving board of directors, shareholders, and a lot more. A corporation also can get into contractual agreements. The owners or shareholders of a corporation are identified by their shares in the company. All kinds of business stated above have their own advantages and disadvantages. The success of the business only depends on how they are handled and operated by their owners. Non-profitable associations are the existing entities with the sole purpose of rendering service to the public.

Examples of these associations are the division offices, police departments, public schools, public surgeries, and a lot more. All these associations do not have owners and their systems are altered to fit their activities.