The most important decision you’ll make as a business owner is how to organize your company. A variety of considerations, all of which will determine your company’s future, will be influenced by the shape your corporation takes. Understanding the benefits and drawbacks of each business organization style is critical for aligning your priorities with your business organization type.

The shape of your business would effect on:

  • How are you taxed?
  • Your moral responsibility
  • Formation expenses
  • Costs of operations

Single proprietorship, association, enterprise, and LLC, are the four major categories of corporate entities. The explanation of each of these terms and how they are used in the context of business law in the sections below.
Sole proprietorship
It is a business that is owned and operated by one person. A sole proprietorship is the easiest and most common type of business ownership. It is a corporation that is managed and operated solely for the benefit of the owner. Since the company’s survival is solely based on the owner’s decisions, when the owner dies, the business dies with him.

Benefits of a sole proprietorship include:

  • The owner is entitled to all gains.
  • Proprietorships are subject to relatively little oversight.
  • Where it comes to running the company, the owners have complete control.
  • Starting a company has few requirements—often only a business license.

Contrary to popular belief, there are several disadvantages of using this method. They are:

  • The owner is fully responsible for the company’s debts.
  • The owner’s assets are the only type of equity.
  • It is impossible to pass proprietorship ownership.
  • There isn’t a difference between personal and company earnings.
    Collaboration
    There are two categories: general and exclusive. In general, both partners contribute their capital, land, labour, and other resources to the company and are equally responsible for its debts. In other words, even though you just put a small amount of money into a general partnership, you might be held liable for the whole loan.
    General alliances do not need a written concurrence; between two company owners, partnerships may be implicit or even verbal.

A contractual arrangement between the parties is needed for limited partnerships. They must also file a relationship certificate with the department. Limited partnerships encourage investors to restrict their responsibility for corporate debts based on their equity stake or investment.

Partnerships have the following benefits:

  • Shared resources allow the company to raise more money.
  • Each partner receives a portion of the company’s net earnings.
  • A proprietorship has a similar level of versatility and simplicity.
  • It is inexpensive to create a formal or informal business relationship.

Contrary to popular belief, there are several disadvantages of using this method. They are:

  • Each partner bears full responsibility for all debts and losses.
  • It’s tough to sell a company and it necessitates seeking a new investor.
  • When one of the partners wishes to terminate the partnership, it ceases.

Sizes of Corporations

From small family restaurants to large conglomerates like General Electric, businesses come in all shapes and sizes. To fund operations, larger companies can issue corporate stock. The corporation is publicly listed in this situation, and it is subject to reporting and operational constraints. Smaller enterprises, on the other hand, could be less reliant on government oversight.