Choice or Suitable forms of Business Organization/commercial Organization?



Introduction: - Each forms of organization are good in some respect and not for other respect. So comparison of the various forms of business organization shows that none of these forms is suitable in all respects. The selection of a suitable form of organization can be made after discussing the following factor.

1.       Requirement of Capital:  -The choice of suitable form of organization is also influenced by the capital requirement of the business. When there is small amount of capital required then the sole proprietorship form of business is suitable. If the capital is medium then partnership or private company form of business is suitable and if the capital is required on a large scale, then the company organization of business is appropriate (suitable).

2.       Risk factors and liability: -The second factor is risk and liability taking capacity of entrepreneur decides the form of business organization. If the risk is low and owner desires to bear the risk, the sole proprietorship or partnership is suitable and if the risk is very high and owners are not bear the risk, then company organization is suitable.

3.        Continuity and Stability: -There is little continuity and stability in the partnership business. In sole proprietorship continuity and stability ends with the death of the owner. So the point of view of continuity the company organization has to be more suitable.

4.       Government Control: -When the businessman wishes to be free from the Government control and legal procedure, the sole propriety concern is most useful, because there is no complicated procedure to start a sole proprietor.

5.       Managerial Needs: -If the business running on local level and single owner takes decisions about the business, then sole proprietorship is good. When the scope of business is wide and more than one person will be required for that business, then partnership business is useful.

6.       Flexibility: -It is the ability of an organization to adopt the necessary changes. The sole trading concern enjoys maximum flexibility due to adopted changes.

7.       Tax Liability: -The tax Liability of a company is more as compared to partnership or sole trading. The small size of business is small tax liability. An ideal business organization should have minimum tax liability.  Sole trading concern generally is an ideal form in this regard.


8.       Business Secrecy: - Maintain vital business secrets are very important for success of any organization. Sole trading concern enjoys maximum business secrecy. Partnership firms and private companies also have this advantage to some extent.