what are the advantages of business organization? A business organization is a process by which the owner or a group of owners of business assets can convert their rights into the rights to use and manage business assets. This will make the business operation easier and smoother. It is also a way to protect the ownership of the business and its assets.
Here is a list of advantages of business organization:
1. Business organization allows business owners to share the risk and responsibility of the business.
2. It provides legal protection for the owners, investors, and managers of businesses.
3. It offers a wide range of legal forms to run the business.
4. It simplifies and organizes the management of the business.
5. It helps to attract capital by providing security to investors through limited liability.
Let us discuss each of these in detail below:
What are the Advantages of a Business Organization?
1. Share the Risk and Responsibility of the Business
The business organization allows business owners to share the risk and responsibility of the business. For example, in the case of sole proprietorship business, the owner has to bear all the risk and responsibility for his/her actions.
However, in the case of a partnership business, the owners share the risk and responsibility for their actions. This is not possible in the case of a sole proprietorship business. Moreover, in the case of a partnership, owners can decide to dissolve the business at any time by mutual consent without assigning any reason. This is not possible in the case of a sole proprietorship business.
2. Provide Legal Protection for the Owners, Investors, and Managers
The business organization provides legal protection for the owners, investors, and managers of the business. In the case of sole proprietorship or partnership, there is no legal protection for those involved in running the business because there is no separate legal entity for that business.
However, in the case of a corporation or LLC (Limited Liability Company), there is a separate legal entity for that business that provides legal protection to those involved in running that business.
3. Offer a Wide Range of Legal Forms to Run the Business
Business organizations offer a wide range of legal forms to run the business. For example, it can be a corporation or LLC (Limited Liability Company) or partnership, etc. There are different kinds of corporations such as public companies (which offer their shares on the stock exchange), private companies (which offer their shares privately), close corporations, etc.
4. Simplify and Organize the Management of Business
The business organization simplifies and organizes the management of business because it involves a group of people to carry out the business.
In the case of a sole proprietorship, there is only one person involved in running the business, but in the case of a partnership, there are two or more persons involved in running the business.
Moreover, in the case of a corporation or an LLC (Limited Liability Company), there are many people involved in running the business. For example, there is a board of directors and officers and employees, etc. to run the business. This makes it easier for a group of people to manage and organize the work and responsibilities in running that business.
5. Help to Attract Capital by Providing Security to Investors Through Limited Liability
Business organizations help to attract capital by providing security to investors through limited liability. Investors are willing to invest their money because they know that they will not be fully responsible for any loss incurred by the company, unlike the sole proprietorship or partnership businesses.