Types and forms of business organizations (550)

Types of Business Organizations.

There are four major types of business organizations which include:

Sole Proprietorship.

It is a type of business that a single person owns. The owner of the company directly controls all the processes and is accountable for all the business laws and requirements, including losses, debts, and loans. The advantage of a sole proprietorship is that it is easy to set up, and one can quickly diversify or dissolve the business when it is not profitable. Filing tax returns is also easy, and reduced expenses come when partnering with other people. The limitation of this type of business is that one can face limited financial options and have unlimited personal liability for debts and losses incurred in the business.


It is a type of business owned by two or more people who pull their resources together to venture into a business. There are two types of partnerships; general and limited partnership. In a general partnership, the business owners are liable for debts and losses incurred in the business and lawsuits. For a limited partnership, the business owners are not accountable for debts, losses, and lawsuits. The advantage of this type of business is that there is financial backing from the other partner, motivation and they can always assist each other in running the business. The limitation is that all the parties make decisions; profits are shared, there is a higher expense to run the business, and tax filing can be a process.


It is a type of business organization that is categorized into two; S corporation and C corporation. With a C corporation, the business is double taxed, and it can have an unlimited number of shareholders. S corporation is single taxed, and the maximum number of shareholders is 100. With both types of corporations, no person is liable for lawsuits, and shareholders share risk. The advantage of the two kinds of corporations is there is a limited liability, high flexibility, continued existence, and it is easy to sell or transfer stocks. The limitation with this type of business organization is decision making is done collectively, a high cost of starting up, costly to file taxes and run the business. Profits and losses should go through the shareholders first before being approved. Businesses structured in the form of corporations are easy to attract investors compared to the other types of business organizations. 

It is a type of business organization owned by members who have a common interest. They can be incorporated or unincorporated. Some typical examples include credit unions, banks, and housing cooperatives.

I would consider a Sole Proprietorship as the best form of business organization. The first reason is that the owner does not have to consult other people to decide. For other business organizations, decisions can benefit a few people, and wrangles can come up because of the misappropriation of resources. Running a business will also be easy, and success will depend on the effort put in and the decisions made by the owner. There are few rules involved, and the owner can diversify the business to suit the customers’ needs, and profits are not shared. The sole trader can also employ people to help them run the business, and the process of filing taxes is simple.

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