Forms of business organization 11 memorandum to the

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FORMS OF BUSINESS ORGANIZATION 11 MEMORANDUM To: The Business Owner From: External agency Date: 14 th June 2015 Subject: Forms of Business Organization I would suggest that the owner of the business should shift from sole ownership to the traditional form of cooperative. Even though he is concerned about sharing of profits and losses if he changes the business form of organization but he should realize that in order to expand the business locally and internationally it is important that the shares must be floated and board of directors is selected and there are officers that tend to operate the C-Cooperative business while the regular members are given the power to vote so that they can control various business decisions being taken. It is important to note that any form of business organization except the sole ownership makes it easier to generate finance and raise working capital. It will also become easier to generate loans and establish credibility in market with the help of a cooperative rather than merely remaining as the sole owner of the company. Members are formed through purchasing the shares of the cooperative, but the amount of shares owned is not directly related to the voting power of the individuals. It is important that C- Cooperative must register with their local tax authority and attain a tax number. The cooperatives do not have to pay any income tax as far as the business entity is concerned, but the cooperatives have to pay federal tax on their personal income tax and have to follow the rules and regulations of the local tax authority.
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FORMS OF BUSINESS ORGANIZATION 12 The reason why I am suggesting that traditional form of cooperatives must be selected as the form of business ownership is that the cooperatives are not taxed additionally and the shareholders are taxed only once from what they earn from cooperative if they are working there rather than both on their individual earnings as well as profit from the cooperatives. In comparison with sole ownership, it is relatively easier to raise capital and funds with the help of becoming a cooperative as government and many other financial organizations support cooperatives and their business operations. Despite advantages, it is important to note that it comes with its negatives too, as the cooperatives may have to face slower cashflows from the investors as the investors invest depending upon the quality of the products and services that are offered by the cooperatives itself. The small investors are definitely attracted to the idea of having the right to vote but the bigger investor tends to chose another option of investment because the investment size does not impact the decision making and right to vote of the member as they are all treated equally.
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