Forms of Business Organization Perry 1
Introduction
“It is important that the business owner seriously considers the different forms of business
organization—types such as sole proprietorship, partnership, and corporation. Which
organizational form is most appropriate can be influenced by tax issues, legal issues, financial
concerns, and personal concerns. For the purpose of this overview, basic information is presented
to establish a general impression of the business organization.” (Garrison, 1999) Sole
partnership, own all the assets of the business and the profits generated by it. They also assume
complete responsibility for any of its liabilities or debts. In a Partnership, two or more people
share ownership of a single business. A corporation, chartered by the state in which it is
headquartered, is considered by law to be a unique entity, separate and apart from those who own
it. A corporation can be taxed; it can be sued; it can enter into contractual agreements.
In particular, the scope of this paper will be confined to the awareness of business
organizations as one of the ways to improve your knowledge in management. This essay will
discuss the types of recommendations form of business organization, explain how business
income would be taxed if the owners adopt the form of organization recommended. Also, I will
list several advantages that the owners will enjoy the form of business organization that you
recommend. Each of these cases of business organization has their strengths and their
weaknesses when compared to the others, and in the following pages, I plan to explore both the
setup of each of the cases as well as their strengths and to recommend what form of
organizations is best.
In the case study of Sharif, Henry, and Korb, who are recent college graduates in computer
science. They want to start a website development company; however they all have college debts
and currently do not own any substantial computer equipment to get the company started. My
Forms of Business Organization Perry 2
recommendation organization would be, Sharif, Henry, and Korb might first consider organizing
their business as a general partnership. However, a problem for Sharif, Henry, and Korb as new
graduates is that they do not have the funds and with no past business experience will probably
have trouble trying to get a business loan. Therefore, instead of a partnership, a better course of
action is probably to incorporate. So in this way, the college grads might be able to find investors
to contribute capital for stock, and they will be able to structure the financing so that they remain
the major stockholders in the company. My advice on taxation will be, as a corporation, any
income will be subject to corporate income tax. Any dividends paid to stockholders will also
typically be taxed but at a much lower level. Any salaries that Sharif, Henry, and Korb pay
themselves will be a tax-deductible expense for the business. The several key advantages to the
corporate form include its limited liability and the potential to sell more stock if additional funds
