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Forms_Of_Organizations
| Forms Of Organizations
There are many types of organizations. We can separate them into
two major divisions: organizations existing to create profits
(profit organizations. Includes business entities) and
organizations that exist primarily for another purpose
(non-profit organizations. E.g: charity organizations).
3 Types of Business Entities and their common characteristics:
1. Sole Proprietorships.
Sole proprietorships are business that are owned and operated by
one person: the sole proprietor. The owner and the business, is
then the same. For tax purposes, a sole proprietorship is not a
taxable entity, and any profits earned by the business are taxed
on the return of the individual. The proprietor must develop an
accounting system that distinguishes between his/her personal
affairs and that of the business.
2. Partnerships.
Partnerships are businesses that are owned by two or more
individuals. For small partnerships, the agreement is often an
oral agreement between the partners but it is highly recommended
that the agreement be formalized as is done in bigger
partnerships like public accounting firms and most law firms. In
partnering up with individuals in the past, I felt it was
important to outline the division of profits and expenses, as
well as the expected responsibilities of the partners in a
written agreement.
For tax purposes, partnerships are not a taxable entity, like
Sole Proprietorships. The individual partners pay taxes on their
share of the profits of the business. 3. Corporations.
A corporation is an entity organized under the laws of a
particular state. That means that it can get into contractual
agreements into its own name. They are identifiable by the
existence of shares. For tax purposes, they, not their owners,
are taxed.
There are advantages and disadvantages of each of the above
types of business entities. And each is suited to the same
business under different stages of its growth. For most, arts
and entertainment independent contractors, it is probably Sole
Proprietorships and Partnerships that are most common for their
use.
Non-Business Entities
Most non-business entities are organized to serve the needs of
various segments of society. Examples of these non-business
entities are public hospitals, public schools, the police and
the army. All of these entities are distinguished by the lack of
an identifiable owner. Because of this and the non-profit motive
to these organizations, their accounting systems are modified to
fit their activities. The type of accounting they use are
referred to as fund accounting.
About the author:
Marquez Comelab is a private currency trader based in Melbourne
, Victoria . He is the founder of TheFreedomToChoose.com - an information portal about trading financial markets,
real-estate and business and OrangesAndLime.com -
producers of cards, prints & posters. Contact him at
mqz@orangesandlime.com.
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