Types of Business Structures

This document provides an overview of different types of business structures including partnership, sole proprietorship, companies, and corporation. It discusses the advantages and disadvantages of each structure and also explores the sources of funds for a company. The document also covers the major liabilities faced by a company and the factors to consider when formulating share structure. Additionally, it explains the duties of directors and officers of a corporation and the remedies for dissatisfied employees. Finally, it discusses the termination of corporations and the penalties associated with personal liability.

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Business Organization
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BUSINESS ORGANIZATION 2
Business Organization
Types of Business Structures
Partnership
A partnership is a business that is owned by a variety of owners, and each of them has
invested heavily in a particular business. The partners of such a business often have both limited
and unlimited liabilities. One key advantage of the partnership business is that it is easy and
simple to establish (Argyris, 2017). However, it has limitations, and an essential disadvantage is
that it the liability of the partners of the business in regards to debts is unlimited.
Sole Proprietorship
It is a type of business that is owned and run by one particular individual, and there is no
legal distinction between the business entity and the owner. A vital advantage of this business
enterprise is that they are easy to form. However, it has the disadvantage that the owner of the
business is particularly liable for all the losses and liabilities of the business.
Companies
They are a legal entity that is made up of an association of various individuals to make a
profit. One key advantage of a company is that they usually have a perpetual existence such that
the insanity, death as well as the insolvency of the directors and the shareholders do not affect
the existence of the firm (Roberts, 2018). On the other hand, a key disadvantage of companies is
that there is no secrecy because companies are required to submit statements to the registrar of
the companies. The lack of secrecy is further stimulated by the provision of annual reports to the
shareholders that could also made available to the key competitors of the firm.

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Corporation
A corporation is a group of companies with the authority to conduct a particular activity
as a single entity, and this is recognized in the law. One key advantage of a corporation is that
the shareholders do not have any particular liability for the debts owed by the corporation
(Burke, 2017). The disadvantage of a corporation is that it incurs double taxation in the sense
that its income is taxed as well as that of the shareholders’ dividends.
Question 2
The business structure selected for the venture is a company. Therefore the following will
be the principal sources of funds. The primary sources include venture funding, working capital
loans, equity, debentures, letter of credit, retained earnings and term loans among others.
However, for the start-up business, the principal sources of funds would be, personal investment,
government subsidies, venture funding, and angels. The parties involved in the provision of
funds will become the principal shareholders of the company; thus they will be charged with the
responsibility of management and general administration of the firm(Argyris, 2017).
Other responsibilities of those who will contribute their money include a declaration of
dividends, approval of the company's financial statements, winding up of the company and
making changes to the company's constitution where necessary (Roberts, 2018). The receiver of
the funds will be responsible for keeping custody of the money to ensure that it is safe and utilize
for its actual purpose. Another critical responsibility of the receiver will be to allocate the funds
appropriately to a variety of functions.
Question 3
Based on the business organization that is a company, the major liability I would be faced
with is the debts that I would borrow to finance the whole business idea fully. The major method

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of financing that I would use is borrowing loans that will take some time to pay back. The other
investors on the hand would be faced with current liability that is the company's obligations that
are due within the usual operating cycle that could be one year or so (Burke, 2017). The extent of
the liability will be high since it is expected that all the debts that shall have been borrowed to be
used for investment will be paid back within a short period of time that is likely to be one year.
Question 4
a) Factors to Consider When Formulating Share Structure
There are several factors to take into account during the formulation of the share structure
of the corporation. Such factors include the financial leverage, cost of capital, risks, cash flow
ability to service debt, size and nature of the organization and control (Argyris, 2017). Apart
from the mentioned factors, others could be the investors' requirements, flexibility, the structure
of the assets, conditions of the capital market, corporate tax rate and personal considerations.
After the formulation of the share structures, each of the shares will be sold to particular
individuals since this will be a privately owned organization (Neubauer & Lank, 2016). The
principal classes of shares that will be created include, the ordinary shares, deferred shareholders
and preference shares. However, the fundamental rights of attached to the shares include, the
right to newly issued shares, general meeting voting rights, right to share the company's profits,
assets and losses and the right to control and influence the selection of management of the
particular company.
b) If there are only one class of shares that will be issued, then the three essential rights that
will be given to each of the shareholders include, the right to income, assets and losses of the
company, the right to newly issued shares and the right to general meeting voting for all the
shareholders of the company.

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c) Duties of Directors and Officers of the Corporation
Management of the Corporation’s Operations
The officers and the directors of the corporation are responsible for the management and
administration of the operations of the corporations. It is the critical responsibility of the officers
of the corporation to ensure that there is an effective operation of the corporation (Burke, 2017).
Another essential duty of the corporation officers would be to ensure that the corporation can
meet its statutory obligations such as compliance with the rules and regulations of the company's
act. For instance, it is a requirement that all the returns are submitted annually to the required
authority.
Remedies for Dissatisfied Employees with the Management
The four options for Chris dissatisfaction with the management would include, giving
him recognition through awards as well as promotions to motivate him to continue working hard
for the corporation. The other remedy is to offer a clear set of objectives as well as for
instructions (Neubauer & Lank, 2016). Such instructions and goals should be made clear to Chris
to avoid any particular conflict of interest while carrying out other critical operations of the
corporation. Another remedy is continuously to communicate with Chris on certain vital matters
relating to the activities and roles of each of the officers and workers of the corporation. Finally,
Chris should be assigned other duties to help me to perform particular tasks that he likes and
loves, and this will reduce boredom.
Termination of Corporations
To terminate a corporation, the following are the ways that can be used;

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Winding up of the Business
A company can be terminated through winding up of the business that entails the
discharge of all of the obligations and liabilities of the corporation (Burke, 2017). After the
dissolution, all the assets are sold, and some are distributed to the stockholders of the
corporation.
Voluntary Dissolution
After the board of directors has voted to approve the dissolution of the corporation, there
will be termination. Later, the issue is submitted for approval to the shareholders.
File a Certificate of Dissolution
The corporation can also be terminated by filing a certificate of dissolution with the state.
This can be done online through emails.
The attraction of Personal Liability through Statute
Then five significant ways to attract personal liability through statute would be; debts of
the corporation, insolvent trading, fraudulent activities, reckless trading, and suretyship.
Penalties
The critical penalties include disqualifications, the imposition of fines,

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References
Argyris, C. (2017). Integrating the Individual and the Organization. Routledge.
Burke, W. W. (2017). Organization change: Theory and practice. Sage Publications.
Neubauer, F., & Lank, A. G. (2016). The family business: Its governance for sustainability.
Springer.
Roberts, J. (2018). Multinational business service firms: development of multinational
organization structures in the UK business service sector. Routledge.