A business organization is an entity formed for the purpose of carrying on commercial enterprise. It is structured in a way that helps the business meet its goals. There are different categories of business organizations that relate to how the business is established, owned, and operated. The basic categories of business organization are:
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Sole Proprietorship: In this form, a single person holds the entire operation as his personal property, usually managing it on a day-to-day basis.
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Partnership: This form may have from 2 to 50 or more members, as in the case of large law and accounting firms, brokerage houses, and advertising agencies.
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Corporation: This form is a legal entity that is separate and distinct from its owners. It can have many owners, known as shareholders, who own shares of stock in the company.
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Limited Liability Company (LLC): This form is a hybrid of a partnership and a corporation. It provides the limited liability protection of a corporation while allowing for the tax benefits of a partnership.
Each type of business organization has benefits as well as disadvantages. Business organization affects how a business is treated under the law, and state and federal governments provide incentives and rules for every type of business organization.
