Types and Characteristics of Business Structures

Summary:

Business Organization is divided into two branches: Business Structure and Business Analysis. The focus is initially on business structure, which includes different forms or types of businesses. The first type discussed is Sole Trader or Proprietorship, which is a business owned by one person. The characteristics of a sole proprietorship are outlined, such as the sole control by one person, the owner supplying all the equity, and the owner being responsible for all loans, taxes, and profits. Advantages of a sole proprietorship include its straightforward setup and the owner making all business decisions. Disadvantages include limited opportunities for employees and difficulty in raising external funds.

The second type is Business Partnership, which involves associating two or more individuals sharing profits and losses. The characteristics of a partnership are described, including the partnership agreement, buying into the partnership, and the liabilities of the partners. Advantages of partnerships include diversified managerial talents, greater financial resources, and simplicity of organization. Disadvantages include unlimited liabilities, the need for trust between partners, and limited and uncertain life.

Corporations are also discussed, highlighting their separate legal identity, limited liabilities, and existence as either private or public companies. Advantages of corporations include limited liabilities for owners, specialized management, and ease of ownership transfer. Disadvantages include legal procedures for setup, government control, and double taxation.

The formation and registration processes for these business types are explained, along with factors to consider when choosing a business ownership structure.

Excerpt:

Types and Characteristics of Business Structures

BUSINESS ORGANISATION: There are two branches of business organization, namely Business Structure and Business Analysis. We will start with Business Structure.

FORMS/TYPES OF BUSINESS: (1) SOLE TRADER/PROPRIETORSHIP: This business is owned by one person only.

CHARACTERISTICS OF SOLE TRADER/PROPRIETORSHIP:

• One person solely controls it.
• The owner supplies all the equity (capital or share capital).
• The owner is responsible for all the loans if any, taxes, and the profits as well.
• It is taxed once.
• It has unlimited liabilities.
• The owner makes all decisions and guidelines.
• The business’s life is tied to the owner, i.e., if the owner dies, the business also dies.