Organizational Forms Essay Example | Topics and Well Written Essays - 1750 words

Organizational Forms - Essay Example The major characteristics of sole proprietorship are as follows: Liability: Liability is the biggest disadvantage in sole proprietorship organizational form. In sole proprietorships, if the business suffers huge amount of dues which cannot be recovered from revenue, the owner will be personally liable for paying the entire amount. On the flip side, if proprietor possesses unpaid dues, the creditors can even realize those from the business assets (McGuire, Woods & McLean, n.d.). Income tax: Sole proprietorship business is a taxable unit. In this business form, there is little opportunity for tax planning, as the owner is completely liable to pay all the taxes derived through income (McGuire, Woods & McLean, n.d.). Longevity or continuity of the organization: The longevity of sole proprietorship business depends largely on the existence of its owner (Beatty, Samuelson & Bredeson, 2012). Control: In sole proprietorship, the business owner has the entire control over the resources and bu siness decisions which is a significant advantage of sole proprietorship (AllBusiness, 2007). Profit retention: The other advantage of sole proprietorship business is that it allows the business owner to enjoy complete profit retention (McGuire, Woods & McLean, n.d.). ... p business is quite easy to set-up with minimum capital; however, it significantly depends on the financial ability of the proprietor (McGuire, Woods & McLean, n.d.). General Partnership General partnership is the second type of organizational form which denotes business relationship between individuals forming independent organization through mutual contracts. Liability: Liability is an advantage in general partnership because each business associates are mutually and individually responsible for every facet of the business including profit/loss or major decisions (McGuire, Woods & McLean, n.d.). Income taxes: Similar to sole proprietorship, general partnership organizational form has a single level of taxation. This type of business does not fall under the taxable unit, rather it is considered as a tax reporting unit (McGuire, Woods & McLean, n.d.). Longevity or continuity of the organization: Longevity is a significant disadvantage of general partnership. There is supposed to be s pecific time duration for the term of general partnership. The longevity of general partnership depends on the contract. Whenever a partner is discharged from the contract, the other existing partners can take over the vacant place or they can even decide to wind-up the complete business (McGuire, Woods & McLean, n.d.). Control: Each business associates possess equal level of control on business decisions (McGuire, Woods & McLean, n.d.). Profit retention: Business associates share the gross profits in between themselves and are taxed independently (McGuire, Woods & McLean, n.d.). Location: The taxation in general partnership relies on the principal regulations location where revenue has been generated (Beatty, Samuelson & Bredeson, 2012). Convenience or burden: A common burden in general