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

The three types of business organizations and the difference between them. 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 organizations are complying with legal regulation, the requirement of direction and use of resources, aims to achieve the objective, and possess a formal structure. The three main types of business organizations are proprietorship, partnership , and Corporation. The primary difference is there is a single owner in case of a proprietorship, whereas a partnership form of business has two or more owners that divide the profit earn by the business organization. In the case of a corporation, there are shareholders that enjoy ownership in the business to the extent of shares held by them. 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 The revenue generated out of this type of business organization, whether withdrawn or invested back in the business is taxed as personal income of the business owner.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 Advantage and disadvantage of Proprietorship are shown below: 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 Advantage and disadvantage of Partnership are shown below: 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 most significant element of the corporation form of business organization is limited liability, which means that shareholder cannot be held personally liable for the debt of the company. The Advantage and disadvantage of Corporations are shown below: 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.

The three types of business organizations and the difference between them. 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 organizations are complying with legal regulation, the requirement of direction and use of resources, aims to achieve the objective, and possess a formal structure. The three main types of business organizations are proprietorship, partnership , and Corporation. The primary difference is there is a single owner in case of a proprietorship, whereas a partnership form of business has two or more owners that divide the profit earn by the business organization. In the case of a corporation, there are shareholders that enjoy ownership in the business to the extent of shares held by them. 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 Advantage and disadvantage of Proprietorship are shown below: 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 Advantage and disadvantage of Partnership are shown below: 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 most significant element of the corporation form of business organization is limited liability, which means that shareholder cannot be held personally liable for the debt of the company. The Advantage and disadvantage of Corporations are shown below: 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 differences between the three types of business organizations: 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

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Chapter 1, Problem 7.1STQ

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What are the different types of business organization?

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

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

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