Every business organization adopts some kind of formation, which determines that how business is going to work for them and what structure is going to be followed in this regard. It is important to understand for any new venture that there are various formations that they can adopt to start their business, and each formation can have its own implications. It is also critical before launching the company that they understand different formations and look at their positives and negatives. There could be various issues to keep in mind, while considering for any formation like what would be the legal complications, how tax and formation will be managed, what kind of management is needed etc. There are three common formations of the companies including Sole Proprietorship, Partnership, and Limited Liability Company (Rogers 2018).

Sole Proprietorship of Three Common Formations of the Companies

            It is one of common type of business formation. In this type, the business is owned by a single person, who not only owns the business, but also manages it by doing all relevant activities and transactions. Such company will not be considered a legal entity as everything is owned by the owner. The owner of the company will be responsible for everything like any liabilities, debts etc. The company also does not pay any taxes rather the owner pays taxes on his income. There are various benefits of sole proprietorship. In such formation of the company, the owner is able to have complete control of things. The decision making power also lies within the domain of the owner. The sole proprietorship has the discretion of making any transfers or sale. The other big benefit is that such company does not have to pay any corporate taxes. The legal costs as well as formal business requirements are also few as compared to many other formations. The negative thing about such formation is that what happens in the company, every responsibility would be on sole proprietor shoulder. The owner will also be held responsible for any kind of liabilities or debts and even an employee commits a wrong act, the consequences will be on the shoulder of sole proprietor (The New York Times 2007). Amazon is one of the major examples, which started as a sole proprietorship.

References of Three Common Formations of the Companies

Rogers, Karen. 2018. Types of Business Formations. Accessed October 28, 2018. https://smallbusiness.chron.com/types-business-formations-74118.html.

The New York Times. 2007. Advantages and Disadvantages of Sole Proprietorships. Accessed October 28, 2018. https://archive.nytimes.com/www.nytimes.com/allbusiness/AB4113314_primary.html?mcubz=0.