Be familiar with the Major Forms of Business Organization

A business organization is the most necessary choice you’ll make about your company whether it’s a big or small business. The values recognized by small business personnel tend to become common factors. Small businesses usually can install similar quality management systems found in bigger corporations.

Small businesses are significant since they offer opportunities for entrepreneurs. And produce meaningful jobs with amazing job satisfaction compared to huge traditional companies. It is an important step to align your goals to your business organization type. A business organization has 4 main types. Namely sole proprietorship, corporation, partnership, and LLC or Limited Liability Company. Below is a great post to read an explanation of each form.

Major forms of Business Organization:

Sole Proprietorship

The most usual and simplest form of business ownership. A sole proprietorship is a business owned and managed by someone for their benefit. The business’ existence is completely dependent on the decision of the owner.

Advantages of a sole proprietorship:

  • All profits are subject to the owner
  • Owners have complete flexibility when operating the business
  • There are very few regulations for proprietorships
  • Only a few need to usually start the business, usually a business license


There are 2 types of partnership, limited and general. In general partnerships, both owners invest their property, money, labor, and others in the business. That is 100% liable for business debts. A formal agreement is no longer needed in general partnerships. Partnerships can be implied between the two business owners, or even verbally.

While Limited partnerships need a formal agreement between the partners. A certificate of the partnership must be filed.

Advantages of partnerships:

  • The total profits of the company are being shared by each partner
  • Simple design and similar flexibility of a proprietorship
  • Affordable to create a business partnership, whether formal or informal


Corporations are separate groups, for tax purposes, and are considered legal persons. The profits produced by a corporation are taxed as the personal income of the company. Then any income given out to the shareholders as profits or dividends is taxed again. At the personal income of the owners.

Advantages of a corporation:

  • Restricts liability of the owners to losses or debts
  • Losses and profits belong to the corporation
  • Personal assets cannot be grasped to pay for business debts
  • Can be transferred fairly and easily to the new owners

Limited Liability Company (LLC)

An LLC gives owners limited liability while offering some of the income advantages of a partnership. In LLC, the advantages of corporations and partnerships are combined.

Advantages of an LLC:

  • Limits liability to the company owners for losses or debts
  • The profits of the LLC are divided by the owners without double-taxation.

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