Reading. A business organization is frequently referred to as a business enti­ty

A business organization is frequently referred to as a business enti­ty. A business entity is any business organization that exists as an eco­nomic unit. Business entities can be grouped according to the type of business activity they perform.

Service companies perform services for a fee. This group includes companies such as accounting firms, law firms, repair shops, and many others.

Merchandising companies purchase goods that are ready for sale and sell them to customers. They include such companies as auto dealer­ships, clothing stores, and supermarkets.

Manufacturing companies buy materials, convert them into prod­ucts, and then sell the products to the companies or to the final customer. Examples are steel miles, auto manufacturers, and so on.

The business entity concept applies to all forms of businesses - a single proprietorship, a partnership, and a corporation.

A single (sole) proprietorship is business owned by an individual and often managed by that same individual. Single proprietors include physicians, lawyers, electricians, and other people who are 'in business for themselves'. In a single proprietorship, the owner is responsible for all debts of the business. Operating as a proprietorship is the easiest way to get started in a business activity.

A partnership is a business owned by two or more persons associ­ated as partners. Partnerships are created by an agreement. The agreement may include general policies, distribution of profit, responsibilities. Accountants, attorneys, and other professionals frequently operate their firms as partnerships. The major disadvantage of the partnership is unlimited liability of each partner for the debts of the business, that is complete financial responsibility for losses. There are several types of partnerships: a general partnership, a limited partnership and a joint venture.

A corporation is a business owned by a few persons or by thou­sands of persons. The owners of the corporation are called shareholders or stockholders. They buy shares of stock. If the corporation fails, the owners lose only the amount they paid for their stock. The stockholders do not directly manage the corporation; they elect a board of directors to represent their interests. The board of directors selects the president and vice president, who manage the corporation for the stockholders. The great drawback of the corporate form of ownership is double taxation of profits which means that business corporations must pay taxes on their net income and then the shareholders are to pay taxes on the income they receive as dividends on their stock.