Skip to main content

Business Finance Healthcare Finance: An Introduction to Accounting and Financial Management

Three types of business organization along with their advantage and disadvantage Introduction: Business organization refers to the entity which is formed for carrying out activities as a commercial enterprise to satisfy the needs of the customer and earn reasonable profit from its operation. The common features of business organization are complying with legal regulation, requirement of direction and use of resources, aim to achieve objective and possess a formal structure. The three main type of business organization are proprietorship, partnership and Corporation. Proprietorship is a form of business organization which can organize in an easy manner. The revenue generated out of this type of business organization, whether withdrawn or invested back in the business is taxed as personal income of the business owner. The advantages of proprietorship are lower tax in comparison to corporation that is required to pay high corporate tax and there are very few government regulations that need to be complied with. The disadvantages of proprietorship are difficulty in making large amounts of capital and the life of the business is limited and prevails till the owners are alive. Partnership refers to the form of business organization which is operated and managed by two or more parties and they share profit and loss in the proportion of their capital. The advantages of the partnership type of business organization are taxes to be paid on personal income, easy to form, less risk in comparison to sole proprietorship. The disadvantages are sale of interest is difficult for the partners, difficulty in making large amounts of capital and the owners have unconditional liability against the debt of business. Corporation refers to the legal entity which is distinct and separate from its owners. The rights and responsibilities that are enjoyed by Corporation are similar to what an individual has, such as pay taxes, own taxes, hire employees, sue and be sued and borrow money. The advantage of corporation form of business organization are owners possess limited liability, easy to transfer ownership as it is associated with the stock held by the owner and unlike a sole proprietorship a corporation enjoys unlimited life as it is not tied to a single owner. The disadvantages are high cost of converting business into corporation, Corporations are taxed twice and corporations have an intense paper work.

Three types of business organization along with their advantage and disadvantage Introduction: Business organization refers to the entity which is formed for carrying out activities as a commercial enterprise to satisfy the needs of the customer and earn reasonable profit from its operation. The common features of business organization are complying with legal regulation, requirement of direction and use of resources, aim to achieve objective and possess a formal structure. The three main type of business organization are proprietorship, partnership and Corporation. Proprietorship is a form of business organization which can organize in an easy manner. The revenue generated out of this type of business organization, whether withdrawn or invested back in the business is taxed as personal income of the business owner. The advantages of proprietorship are lower tax in comparison to corporation that is required to pay high corporate tax and there are very few government regulations that need to be complied with. The disadvantages of proprietorship are difficulty in making large amounts of capital and the life of the business is limited and prevails till the owners are alive. Partnership refers to the form of business organization which is operated and managed by two or more parties and they share profit and loss in the proportion of their capital. The advantages of the partnership type of business organization are taxes to be paid on personal income, easy to form, less risk in comparison to sole proprietorship. The disadvantages are sale of interest is difficult for the partners, difficulty in making large amounts of capital and the owners have unconditional liability against the debt of business. Corporation refers to the legal entity which is distinct and separate from its owners. The rights and responsibilities that are enjoyed by Corporation are similar to what an individual has, such as pay taxes, own taxes, hire employees, sue and be sued and borrow money. The advantage of corporation form of business organization are owners possess limited liability, easy to transfer ownership as it is associated with the stock held by the owner and unlike a sole proprietorship a corporation enjoys unlimited life as it is not tied to a single owner. The disadvantages are high cost of converting business into corporation, Corporations are taxed twice and corporations have an intense paper work.

Solution Summary: The author explains the three main types of business organization: proprietorship, partnership, and Corporation.

Healthcare Finance: An Introduction to Accounting and Financial Management

Healthcare Finance: An Introduction to Accounting and Financial Management

6th Edition

ISBN: 9781567937411

Author: Louis C. Gapenski, Kristin L. Reiter

Publisher: Health Administration Press

See similar textbooks

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

Blurred answer

Chapter 1, Problem 1.7QAP

Chapter 1, Problem 1.9QAP

Students have asked these similar questions

What are the three principal forms of business organization? What are theadvantages and disadvantages of each?

What are the various forms of business organization? What are the advantages and disadvantages of each?

What are different forms of business organization? Write down their advantages and disadvantages.

Chapter 1 Solutions

Healthcare Finance: An Introduction to Accounting and Financial Management

Ch. 1.1 - Prob. 1.1STQ Ch. 1.1 - Prob. 1.2STQ Ch. 1.1 - Prob. 1.3STQ Ch. 1.1 - Prob. 1.4STQ Ch. 1 - Prob. 1.1STQ Ch. 1 - Prob. 1.2STQ Ch. 1 - Prob. 1.3STQ Ch. 1 - Prob. 1.4STQ Ch. 1 - Prob. 2.1STQ Ch. 1 - Prob. 2.2STQ

Knowledge Booster

Background pattern image

Similar questions

SEE MORE QUESTIONS

Recommended textbooks for you

Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
CONCEPTS IN FED.TAX., 2020-W/ACCESS
Accounting
ISBN:9780357110362
Author:Murphy
Publisher:CENGAGE L
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Entrepreneurial Finance
Finance
ISBN:9781337635653
Author:Leach
Publisher:Cengage
Survey of Accounting (Accounting I)
Accounting
ISBN:9781305961883
Author:Carl Warren
Publisher:Cengage Learning
Corporate Fin Focused Approach
Finance
ISBN:9781285660516
Author:EHRHARDT
Publisher:Cengage

Text book image

Intermediate Financial Management (MindTap Course...

Finance

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Cengage Learning

Text book image

CONCEPTS IN FED.TAX., 2020-W/ACCESS

Accounting

ISBN:9780357110362

Author:Murphy

Publisher:CENGAGE L

Text book image

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:9781337514835

Author:MOYER

Publisher:CENGAGE LEARNING - CONSIGNMENT

Text book image

Entrepreneurial Finance

Finance

ISBN:9781337635653

Author:Leach

Publisher:Cengage

Text book image

Survey of Accounting (Accounting I)

Accounting

ISBN:9781305961883

Author:Carl Warren

Publisher:Cengage Learning

Text book image

Corporate Fin Focused Approach

Finance

ISBN:9781285660516

Author:EHRHARDT

Publisher:Cengage

SEE MORE TEXTBOOKS