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Type of Business Organization

Perhaps you’ve already heard of the terms business structure, business ownership, and business organization.

Well, these things can refer to the same thing although under each category, you can find some differences as well.

When it comes to business organization, there are only three types – sole proprietorship, partnership, and corporation.

Three Types of Organization

As the name suggests, a sole proprietorship business is owned and managed by one person only. It involves a low startup cost and all profits will go to the sole owner. Under this type, you will face unlimited liability and with limited resource, the commercial life of your business will also be restricted. If you think you can’t handle the risks of this business, you can opt for a partnership. This is composed of two or more partners working together to earn profits. This is a better option because the business will have access to more capital and possible synergism. Like the sole proprietorship, liability is also unlimited and when there disputes among partners, the whole business can be jeopardized.

Legal entities that are going business are called corporations. This is the third type of business organization. A corporation can have many owners, referred to as stockholders or investors. The organization is made possible through the articles of incorporation. There are major advantages for choosing this type which includes limited liability and unlimited business life. However, the organization cost or expenses are usually higher and the company is subject to a lot of restrictions. The licensing fees tend to be higher as well and the various business aspects can get complicated.

If you’re interested to start a new business, you must look into these types of organization and pick the one that can meet your needs, requirements, and budget. Conduct a thorough research about the market and you can make the right decision.

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1 Comment

  • Amit vashisht said on August 21, 2010
    i m in ludhiana city in punjab which is in india. i have done mba. i m a starter so pls suggest what type of business i should start. Amit vashisht 9872525231. Thanks

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