Types of Business Organizations

Types of Business Organizations

When it comes to organizing a new business,  there are several important decisions that need to be make. One of the most important decisions is choosing the structure of your new retail business. Factors influencing your decision about your business organization should include:

• Capital needs
• Legal restrictions
• Type of retail business operation
• Earnings distribution
• Liabilities assumed
• Number of employees
• Tax advantages or disadvantages
• Length of retail business operation

Advantages and disadvantages of sole proprietorship, partnership and corporation:

Sole Proprietorship

Is the easiest and least costly way of starting a business, as it can be formed by finding a location and opening the door for business. There fees that need to be paid in order to obtain your retails business’ name registration, a fictitious name certificate and other licenses that you might need. Attorney's fees for starting a retail business will be smaller than for other business forms; less preparation of documents is required and the owner has absolute authority over all business decisions.

See also Starting up a Small Business.

Partnership

When it comes to partnership there are several types. Two of the  most common types are general and limited partnerships.

A general partnership can be made by a simple by an oral agreement between two or more persons. However, a legal partnership agreement is highly recommended. The legal fees for a partnership agreement are higher than those for a sole proprietorship. However,  they may be lower than incorporating.

Having a partnership agreement will help you in solving any disputes that may occur. When you are starting a partnership, have in mind that  the partners are responsible for the other partner's business sactions, as well as their own.

A Partnership Agreement has to include at least the following:

• Type of business
• The amount of equity invested by each partner
• Each partners compensation
• The distribution of assets on dissolution.
• The duration of partnership.
• A dispute settlement clause.
• At least some Restrictions of authority and expenditures.
• Division of profit or loss.
• Provisions for changes or dissolving the partnership.
• Settlement in case of death or incapacitation.

Corporation

Businesses may do well without an attorney, though legal advice is highly recommended. The corporate structure is the most and complex to organize than compared with other business formations. When it comes control, this depends on stock ownership. The persons with the largest stock ownership control the corporation, not the total number of shareholders.

When a person or group has stock shares or 51 percent of stock, then that person or group is able to make policy decisions. In  corporations  control is exercised through board of directors' meetings and annual stockholders' meetings. It’s always useful to keep records to document decisions made by the board of directors. A corporation that is closely held will be able to operate more informally. However, record-keeping cannot be eliminated entirely.