Many people start a business because they want to solve a problem, make the world a better place, or make money. However, most businesses are not profitable unless they have good organization. Without a clear structure, it is easy to lose track of what you are doing, and your employees may not work well together as a team.
A business is organized when its operations, personnel and processes are clearly defined and documented. This allows employees to understand their roles and responsibilities, and it also improves accountability. Organization allows managers to make decisions quickly and efficiently, and it makes it easier for employees to follow directions.
The simplest form of business organization is the sole proprietorship, which is one person owning and operating a business with no other business entity or legal separation. This type of business does not require any filing with the government or other formalities, and it is very easy to set up. Profits earned are taxed as personal income.
A partnership is a voluntary association of two or more persons who engage in a business and share profits and losses. This form of business is less expensive to set up than a corporation, but it has the disadvantages of unlimited liability and lack of continuity of ownership if a partner dies or decides to withdraw from the business.
A corporation is an incorporated business that has a board of directors, shareholders, and other legal entities. It can raise capital through the sale of stock and has limited personal liability. A corporation is the most complex form of business to establish, but it offers the benefit of being able to attract large investors and provide legal protection for its members.