Starting a business requires planning, projecting what you want for your business today, and determining what your business plan is for the future. A successful business must plan for future growth, which requires making choices today about the type of business to be created. Understanding the different business types, as well as the advantages and disadvantages of each, will assist in making the decision.
In addition, you must be familiar with the key roles involved in each type of business, as well as how they utilize financial information to make operational decisions. The first step is researching the 3 types of business organizations. This research process will allow you the opportunity to explain the fundamental concepts of accounting in the health care environment and showcase your growing accounting skills.
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Preparing for the Assignment:
As head of your department, you are responsible for disseminating information to your staff. You have decided to create an infographic handout about the 3 types of business organizations to help them learn about the 3 types of business organizations, understand the key users’ roles, and recognize how the different types of business organizations utilize financial information in the day-to-day business operations.
Use the information from Ch. 1, “Introduction to Financial Statements,” of Accounting to create an infographic in which you:
- Describe the following 3 types of business organizations: sole proprietorships, partnerships, and corporations.
- Describe 1 advantage and disadvantage for each of the 3 types of business organizations.
- Describe the key users (i.e., sole proprietor, partnership, board of directors, CEO, COO, CFO, managers, etc.) of financial information.
- Explain the types of day-to-day business decisions made by using financial statements.
Format any references used according to APA guidelines.
Submit your assignment.
Types of Business Organizations:
- Sole Proprietorship: A business owned and operated by one individual. The owner is solely responsible for the business’s debts and obligations.
- Partnership: A business owned by two or more individuals who share profits and losses. Each partner is responsible for the business’s debts and obligations.
- Corporation: A legal entity that is separate from its owners. Shareholders own the corporation, and its directors and officers manage it.
Advantages and Disadvantages of Each Type of Business Organization:
- Sole Proprietorship: Advantages:
- Easy to set up and run
- Owner has full control over the business Disadvantages:
- Owner is personally liable for business debts and obligations
- Limited access to capital
- Partnership: Advantages:
- Easy to set up and run
- Partners share profits and losses Disadvantages:
- Partners are jointly and individually liable for business debts and obligations
- Disputes between partners can arise
- Corporation: Advantages:
- Limited liability for shareholders
- Access to more capital Disadvantages:
- More complex to set up and run
- Shareholders have limited control over the business
Key Users of Financial Information:
- Sole Proprietor: Uses financial information to manage and make decisions about the business.
- Partnership: Partners use financial information to manage the business and make decisions about profits and losses.
- Board of Directors: Uses financial information to oversee the corporation’s management and make strategic decisions.
- CEO: Uses financial