Types of Business Organizations

Question 1

How many classification of Companies? Describe it

Answer 1

4 Classification of Companies:

1. by sector or industry (primary, secondary, tertiary, quaternary)
2. by geography ( local, regional, national, international)
3. by size (micro, small, medium, large)
4. by legal structure (sole proprietorship, partnership, corporation)

Question 2

Explain the classification of companies according to their legal structure!

Answer 2

1. Sole Proprietorship: are unincorporated business entities run by one owner, with no distinction between the firm and the individual (the owner)
   - business owned by only one person
   - entire profit for the sole proprietor
   - unlimited liability by sole proprietor
2. Partnership: are defined as the associationof two or more individuals who form an agreement to operate a business together and split profits and liability.
   - business owned by two or more people
   - profit sharing among business partners
   - unlimited liability by all business partners
3. Corporation : are legal entities that are subject to the local and national laws where the company were formed
   - business org with a separate legal personality from its shareholder
   - profit sharing among shareholders
   - limited liability of shareholders

Question 3

What is the advantages and disadvantages of sole proprietorship?

Answer 3

Advantages:

• They are not expensive and are easy to form
• All profits go directly to the owner
• They enable business control
• They have regulatory freedom
• They are simple to dissolve

Disadvantages:

• They have unlimited liability
• They have difficulty raising capital
• They lead to limited experience as a business leader or manager
• It is challenging to find qualified talent
• They take up a lot of time
• They are not always stable
• The owner is responsible for all losses

Question 4

What is the advantage and disadvantage of Partnership?

Answer 4

Advantages:
- An agreement is easily drafted after partners agree on how they wish to conduct business together
- Two revenue streams are typically better than one
- Partner share the responsibilities of running a firm
- They are flexible
- They are relatively free from government regulation
Disadvantages:
- They have unlimited liability
- There is the potential for partnership conflicts
- Profits must be shared
- Dividing or exiting may not be straighforward

Question 5

What is the advantage and disadvantage of Corporation?

Answer 5

Advantages: 
- Liability is limited
- Shares are transferable
- For a corporation, life is unlimited; however, corporate charters specify rules and regulations
- They are tax deductible
- They are attractive for investors
Disadvantages: 
- Profits are doubly taxed 
- Business formation is complex and costly
- Regulations are stricter

Question 6

What are the differences in Products and Service?

Answer 6

1. Output Tangibility
   Production facilities produce goods that consumers can physically touch, whereas service firms do not.
2. Product Demand
   Manufacturing facilities try to accurately predict customer demand and use the just-in-time method in relation to inventory levels. Services are created based on customer needs and requests.
3. Production Specificity (customer specific needs)
   Services are produced by firms on an as needed basis are less costly. They typically create a service tailored to customer specific needs.
4. Labor and automation
   Many manufacturing and production can be automated in order to reduce the need for excess labor. The service industry is more labor intensive than the manufacturing sector.
5. Location
   manufacturing need a physical presence (anywhere in the supply chain)in order to operate. The service not