advantages of business organization

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6. Credit Standing – If an individual proprietor has enough resources cash or investments outside the firm, he will enjoy a favourable credit standing among suppliers and others firms an institutions dealing with him. Unlike other business entities, corporations are required to keep a large number of records, and failing to maintain these records can put your company’s corporate status at risk. 8. Image Courtesy : So working in such an organization provides … The businessman thus ensures that the next generation in his family also has a genuine source of earning their livelihood. Thus, it leads to over all personality development. The advantages of the corporation structure are as follows: Limited liability. Privacy Policy3. Since the sole trader takes all decisions, he can steer his business any which way he wishes. Encourages Self-Employment – Sole proprietorship form of business organisation leads to creation of employment opportunities for people. Since the proprietor has all authority with him, it is possible to exercise better control over business. He exercises exclusive control over the affairs of the firm. Social Utility – It provides a scope for independent living, development of personality and diffusion of economic power which is useful to the society. It encourages initiative and innovativeness. Learn how your comment data is processed. He is answerable to no one else. He takes all major or minor decisions. (viii) Minimum Government Regulation – The operatives of a sole proprietor are regulated by govern­ment and law to the minimum extent. 8. The board of directors can take total control of your business, and you may find yourself forced out of the business that you founded. (v) Maintenance of Secrecy – In any business enterprise, maintenance of business secrecy is an important factor; and it is in this individual entrepreneurial organization that the sole trader will get this object fulfilled as there is no need to give publicity to accounts and affairs of this business. This lack of accountability can lead to what is known as the “agency problem” which is when management makes decisions based on their self-interest instead of the interest of shareholders. It makes people self-dependent. In the case of most small size entities, the proprietor also serves as the business manager, with or without the proper skills and education in the field. Brian Bass has written about accountancy-related topics and accounting trends for “Account Today.” In such a process the organization may suffer financial loss. The advantages and disadvantages of a corporation must be considered before you incorporate your business.6 min read. As a result, the business is also assured of a long life. If you are passionate about owning and operating your business, forming a corporation is usually a poor choice. Highly Flexible – It is a highly flexible type of organisation. If they have to consult someone, the opportunities may not wait for long. Such advantages are a result of superior knowledge, which may be technical know-how, cheapest sources of supply of material, an efficient process of manufacture, etc. Some of the biggest benefits of this business structure include access to funding, limited … Direct relationship between efforts and reward encourages him to work hard and earn more. He knows exactly what is to be done and how to do it. Depending on the type of corporation, it may pay taxes on its income, after which shareholders pay taxes on any dividends received, so income can be taxed twice. Quick Decision and Prompt Action – In a sole proprietorship business the sole proprietor alone is responsible for all decisions. 3. Personal Touch 7. Thank you. Your email address will not be published. Hire the top business lawyers and save up to 60% on legal fees. He is the planner as well as the organiser, who coordinates every activity in an efficient manner. Because of a sense of belonging and high morale that a well-structured organization develops among employees and also because of clear-cut accountability, recognition of skill and appreciation for their contribution towards organizational growth, the employees develop their own initiative and a spirit of innovation and creativity. A formal organization gives the opportunity to treat the human resources within the organization. Advantages of Formal Organization. TOS4. Some entrepreneurs interested in forming a corporation decide to file their own paperwork.

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