Understanding Various Types of Organization Structure (Part 1 of 3)

June 6th, 2006 Comments off
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Various Type Of Organization Structure

A business may be carried on in any one of the following form:

  1. Sole proprietorship
  2. Partnership
  3. Limited Company

CHARACTERISTIC OF A SOLE PROPRIETORSHIP

1.The business is solely owned by one person;

2.Management rests on that one person,

3.If such a business fails or is declared bankrupt, the creditors can sue the proprietor for all debts incurred. A legal claim can be made against the personal assets of the proprietor.

4.His liability is unlimited;

Advantages of a Sole Proprietorship:

1. Fewer formalities in terms of its formation and registration.

2. It is an easy procedure to register a sole proprietorship.

3. There is no requirement for the proprietor to maintain accounts for auditing purposes. For tax purposes, a balance sheet or statement of affairs as at the end of the year and a detailed profit and loss account must be submitted to the tax authorities,

4. Sole decision maker. Practical no cost incur on corporate governance which frequently exist in listed companies

Disadvantages of a Sole Proprietorship:

1.If such a business fails or is declared bankrupt, the creditors can sue the proprietor for all debts incurred. A legal claim can be made against the personal assets of the proprietor,

2.Unavailability of capital if the business wants to expand.

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