Alternative Forms of Business Organization
Posted on November 21, 2008 - Filed Under Finance
Throughout the book, the focus is on business finance—that is, the practice of accounting and financial management within business organizations. There are three primary forms of business organization: proprietorship, partnership, and corporation. In addition, there are several hybrid forms. Because most health services managers work for corporations and because not-forprofit businesses are organized as corporations, this form of organization is emphasized. However, many individual medical practices are organized as proprietorships, and partnerships are common in group practices and joint ventures, so health services managers must be familiar with all forms of business organization.
Proprietorships and Partnerships
A proprietorship, sometimes called a sole proprietorship, is a business owned by one individual. Going into business as a proprietor is easy—the owner merely begins business operations. However, most cities require even the smallest businesses to be licensed, and state licensure is required for most healthcare
professionals.
The proprietorship form of organization is easily and inexpensively formed, is subject to few governmental regulations, and pays no corporate income taxes. All earnings of the business, whether reinvested in the business or withdrawn by the owner, are taxed as personal income to the proprietor. In general, a sole proprietorship will pay lower total taxes than a comparable, taxable corporation because corporate profits are taxed twice—once at the corporate level and again by stockholders at the personal level when profits
are distributed as dividends or when capital gains are realized.
Taken From : HEALTHCARE FINANCE
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