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What does "Organizational Structure" mean?
Home » Management » Organization Structures » What does "Organizational Structure" mean?Organizational structure does not just tell us who is in charge of a company or business, but it also dictates the financial liability of those who own or run the business. The organizational structure of a business dictates what tax rules that business will be subject to, what and how much paperwork will be required to comply with government regulations, the businesses avenues for raising money and what the owner’s personal liability will be.
There are three types of organizational structure:
1. Sole Proprietorship
a. Sole proprietorships are owned by one individual and are run under their direction at all times. The owner is personally responsible for all income, expenses, taxes, and liabilities associated with the business.
2. Partnership
a. A partnership is formed when two or more individuals band together to run a business. Partners do not bear the liability or tax burden for their venture alone, but rather share it with the other partners.
3. Corporations
a. A corporation is a created entity designed for conducting business. Corporations pay taxes and can be held liable for the actions of the corporation, but shield the person(s) who formed the corporation from those liabilities.
One form of organizational structure is not better than another, but rather, which organizational structure you choose must be dictated by the circumstances and the ongoing goals of the business. When choosing which organizational structure to use, it would be wise to consult with your attorney, tax professional and other experts in your chosen field.
Related Organization Structures Articles
- What does "Organizational Structure" mean?
- What is a Sole Proprietorship?
- What is a Partnership?
- What is a Corporation?
- What is the difference in Public and Privately held Companies?