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Posted on August 16th, 2012, by

The contemporary business environment is characterized by a variety of forms of business organization. In this respect, the sole proprietorship, the partnership and the corporation are the most widely spread forms of business organization. However, it is important to underline that, along with advantages of various forms of business organization, either form of business organization has its own drawbacks, which affect the performance of companies and organizational culture. In such a situation, it is necessary to take into consideration both advantages and disadvantages before choosing a form of business organization.

On analyzing various forms of business organization, it is possible to single out the sole proprietorship. In fact, this form of business organization is considered to be quite conservative and rigid. The sole proprietorship is grounded on the formation of a strict organizational hierarchy where organizational roles are clearly defined and cannot be changed consistently. In actuality, the sole proprietorship implies the existence of highly formal relationships between employers and employees. Moreover, it is even possible to speak about certain communication gaps and problems in interpersonal relationships between employers and employees because the former attempt to distance from the latter and emphasize their superiority. Naturally, such relationships do not contribute to the development of positive organizational relations. On the other hand, the sole proprietorship is grounded on the strong leadership of employers and strict order and discipline which allows increasing the effectiveness and productivity of work due to the precise performance of specific tasks defined for each individual working within the organization using the sole proprietorship form of business organization.

In stark contrast, the partnership is based on absolutely different principles of the formation of business organization. To put it more precisely, the partnership implies the development of positive interpersonal relations between employers and employees. In fact, employers and employees are viewed as partners which should cooperate and interact with each other. In such a way, employers form a positive experience of relationships with employees and encourage the latter to work more effectively and productively since employees feel their responsibility in face of their employers-partners. Obviously, this form of business organization is consistently more democratic than the sole proprietorship and is grounded on more liberal principles. The latter may be viewed not only as an advantage of this form of business organization, but also as a drawback because liberal relationships, which are characterized as partnership, cannot always maintain a high level of discipline and order within the organization, though the responsibility of people working within the organization is grounded not on the organization hierarchy but on the moral responsibility of employers and employees.

At this point, the partnership is similar to the corporation, but, unlike partnership, the corporation is mainly focused on the formation of the specific corporate culture. All the personnel of the organization using the corporation form of business organization should work as a team. This form of business organization admits the existence of the organizational hierarchy but it puts the interest of the organization above interests of employers that makes this form different from the sole proprietorship.  The drawback of the corporation is the exaggerated focus on the organization and its culture, while business environment is often ignored by both employers and employees.

Thus, the variety of forms of business organization reveals that forms may differ and it is up to the organization to decide which form is the most suitable. Anyway, it is necessary to take into consideration the organizational culture, traditions, goals and existing business environment.

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