Optimal Forms of Organisations – Shareholder Wealth
What factors need to be considered when determining the optimal forms for organization for a business enterprise?
The factors would largely be influenced by what form of business is chosen. However, majorly the points that would be taken into consideration would be:
What would the sources of capital?
How much personal control is to be maintained?
What form of organization would help minimize taxes?
What form would realize the long and short term goals of the business?
How much liability or debts should the investor personally be responsible?
Organizing is the managerial function of arranging people and resources to work toward a goal.
Organizing is a managerial task of arranging people and resources to work towards achieving a specified purpose.
The basic forms of business organization are-
Sole Proprietorship – It is a business form that is owned and controlled by one person. It is the easiest and the most economic business structure to form.
Partnership – It is a legal business relationship in which two or more persons make an agreement to share ownership and administration in a business. There is also a profit distribution plan.
Corporation – It is a legal entity separate from its owners i.e. the shareholders. It can make contracts and it is liable for any obligations. It pays taxes on earnings. Lastly, it is a legal person. This unique identity of the corporation helps in making its continued life possible.
Wealth Maximization versus Profit Maximization-
Wealth Maximization has a view for the long