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Span of control
D. Authority and responsibility
Chapter Outline E. Centralization vs. decentralization
F. Departmentalization
Definition
Factors consideration to form an organization
Key elements of organization structure
Contingency factors that impact organization A. Work specialization
design
Legal forms of business organizations The first component is the division of labor, or
Comparison work specialization. It describes the degree to
which tasks are subdivided into separate jobs. An
Organization entire job is not done by one person. Individuals
specialize in doing part of an activity rather than
A consciously coordinated social unit composed of the entire activity. Work specialization makes
two or more people that functions on a relatively efficient use of the broad skills that workers have.
continuous basis to achieve a common goal or set
of goals. B. Chain of command
Factors to be considered during formation of an The next component is the chain of command--the
organization principle that no person should report to more
than one boss. As you can see in this example, one
Liability individual only reports to another individual.
Taxation
Sharing Profits and Losses
Control and Decision Making
Blending and division of Assets
Workloads
Legal actions
Agency
Expenses
Starting and Stopping
Continuity and Growing
Paper works
Regulatory affairs
Limited company is formed by one or more Companies are managed by directors and owned by
business people, as owners. The owners, called shareholders. The share owned by each person will
"Members," file Articles of Organization and set often reflect the size of their investment in the
company. In the case of small companies the
out an Operating Agreement. In other words, the
directors and shareholders are usually the same
business income is considered as the owner's or
people. A company must be registered at the
shareholder's income, and the owner/shareholder Companies Office. Every year each company has to
pays the tax on his or her personal tax return. send the Companies House an annual return and
financial statements. This is because the accounts
A Corporation is a separate legal entity. It is formed for the limited company have to be audited and
by filing corporate organization forms in the state made available to the public.
where the corporation is located, and by
designating shareholders, each with a specific
number of shares. The corporation also creates a
Comparison Table: Legal Forms of Business Organization
Ownership
Structure Requirements Tax Treatment Liability Advantages Drawbacks
Sole One owner Income and Unlimited Low start-up Unlimited
proprietorship losses pass personal liability costs personal liability
through to Freedom from Personal
owner and are most regulations finances at risk
taxed at
Owner has direct Miss out on
personal rate
control many business
All profits go to tax deductions
owner Total
Easy to exit responsibility
business May be more
difficult to raise
financing
General Two or more Income and Unlimited Ease of Unlimited
partnership owners losses pass personal liability formation personal liability
through to Pooled talent Divided authority
partners and are and decisions
Pooled resources
taxed at
Somewhat easier Potential for
personal rate
access to conflict
flexibility in
financing Continuity of
profit-loss
Some tax transfer of
allocations to
benefits ownership
partners
Limited Two or more Income and Limited, Good way to Cost and
companies owners losses pass although one acquire capital complexity of
through to partners must from limited forming can be
partner and are retain unlimited partners high
taxed at liability Limited partners
personal rate; cannot
flexibility in participate in
profit-loss management of
allocations to business without
partners losing liability
protection
Corporation Unlimited number Dividend income Limited Limited liability Expensive to set
of shareholders; no is taxed at Transferable up
limits on types of corporate and ownership Closely regulated
stock or voting personal Continuous
Double taxation
arrangements shareholder existence
levels; losses and Extensive record
Easier access to
deductions are keeping
resources
corporate Charter
restrictions