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.
