Forms of Business Organization

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In sole proprietorships, if the business suffers a 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 a sole proprietorship, the business owner has the entire control over the resources and business decisions which is a significant advantage of a 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.).Location: The sole proprietorship business needs to get registered with the location i.e. the place where the business intends to operate its functions. Sole proprietorship necessitates gaining permits or licenses from the state government (McGuire, Woods McLean, n.d.).Convenience or burden: Sole proprietorship businessis 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 a 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 a general partnership. There is supposed to be a specific time duration for the term of a general partnership. The longevity of the 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 an 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 location of the principal regulation where revenue has been generated (Beatty, Samuelson Bredeson, 2012).