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