Chapter 1, Problem 1Q

To determine

Identify the three basic forms of business organization.

Answer to Problem 1Q

The business organization consists of three basic forms of business organizations as shown in the below figure.

Forms of Business Organization

Figure (1)

Explanation of Solution

Business organization consists of three basic forms. They are sole proprietorship, partnership, and Corporation.

Business organization is classified as follows:

1. (i) Sole proprietorship: It is one form of simple business that is owned and maintained by a single person. Set up of very simple and taking care of business is very easy. Government provides tax advantages for these firms.
2. (ii) Partnership: Partnership firms are started by two or more individuals joining together. This form of partnership is very easy to establish and there is a shared control. The duties and formalities of the concern are formalized by making a partnership agreement. In this type of company, individuals with similar interest join together and startup a business. As previously stated for sole proprietorship, partnership firms too enjoy tax advantages.   
3. (iii) Corporation: A business concern where there is a separate legal entity and are owned by shareholders are classified as corporation. Transfer of ownership and raising funds are easy in this form of organization. No personal legal liability exists among the shareholders.

Conclusion

Thus, sole proprietorship, partnership, and corporation are the three basic forms of business organizations.