Business organization Essay

Submitted By Rce2510C
Words: 977
Pages: 4

Introduction I want to be my own boss! I’m so tired of working for someone else! These are the typical beginning statements of someone wanting to start their own business. So many people have made these same comments countless times, only to see their dreams dashed by failure. The failures happen in many ways but mostly its failure to follow through, and a lack of understanding of how to create and sustain a successful business. The first step in any business is to understand what the business needs to succeed. According to the Small Business Administration 50 percent of businesses will fail within the first the first year of existence (Small Business Administration, 2012). The reasons vary, but for the most part it stems from not doing the proper homework to understand the nature of the business, what are the cost, and what kind of business should I have. This starts with having a clear and detailed business plan and the first part of the business plan is determining what proper type of business it should be. It is also important to understand that each state and local community could have specific laws and regulations and that should be taken into account when making the business structure decision. Although the basic building blocks for any business remain the same, along with their advantages and disadvantages. The three types of business structures are sole proprietorships, partnerships, and corporations. Each of these business types has unique distinctions within the category. In this case it is important to look at the general advantages and disadvantages of each type. It is important to know about each in that as the business either expands or shrinks it could become beneficial to move into another type of business structure. Sole Proprietorships According to the Chamber of Commerce the majority of businesses formed in the United States call themselves sole proprietorships. This business typically consists of one owner and a small number of employees. The advantages of a sole proprietorship are that they are the easiest businesses to start and have the fewest regulations. The owner gets to keep all the profits which are taxed at a lower level than corporations, and also has full authority over business decisions. With that level of autonomy also leads to the disadvantages of having a sole proprietorship. All business debts and liabilities incurred fall squarely on the owner, which could also include going after the owners’ personal wealth and assets. The growth of the business is dependent on the owners’ personal wealth, and this limits the amount of capital available for the growth of the business. Partnerships As the name indicates, and partnership is a business that consist of two or more people that have decided they want to start and manage a business together. These types of businesses make up 10% of the businesses formed in the United States. Partnerships can be a very complex form of business structure and before entering into a partnership each person should understand what is expected of their role and contribution is within the business and their percentage of the profits. It is also important to understand what happens if the partnership dissolved or one partner wants to leave or dies. Partnerships formed under general partnership have the same advantages and disadvantages as a sole proprietorship as it relates to each partner. Some partnerships can be formed under a limited partnership, meaning the partner is not involved with the day to day operations of the business and thus has limited liability if something should happen to the business.
The most complex type of business structure is corporations. A corporation has many laws and regulations governing their existence, and these laws and regulations vary from state to state and local jurisdiction. To make the complex simple, corporations are considered a legal entity under the law;