a) For each of the three legal forms of business, write a paragraph in which you
ID: 1236245 • Letter: A
Question
a) For each of the three legal forms of business, write a paragraph in which you define the business type and identify the advantages and disadvantages of that type of business structure. In another paragraph, explain the major methods of financing a business.b) Each of the following terms relate to businesses trying to make a profit: fixed cost, variable cost, sunk cost, marginal cost, average cost, and average variable cost. For each of these terms explain the meaning of the term, provide an example, and explain how the information provided by the term can be useful for a business.
Explanation / Answer
There are quite a few ways to start a business in New York. You can start your business as a Sole Proprietor, create a Partnership, or Incorporate. Though some of these options might seem confusing, we will give you information on the different company structures to help you choose the right one for you. The type of company structure you will chose for your business depends on factors such as: riskyness of the industry, number of partners, financing requirements, taxation, long term vs. short term and others. We created a comparison chart below to illustrate the Pros and Cons of the different structures. Formal organization is a fixed set of rules of intra-organization procedures and structures. As such, it is usually set out in writing, with a language of rules that ostensibly leave little discretion for interpretation. In some societies and in some organization, such rules may be strictly followed; in others, they may be little more than an empty formalism. Advantages: In formal organization goals are clearly defined,suitable for all type of businesses, task done in time, objective will be clear, Disadvantages: doesn't allow flexibility, doesn't allow long term planing, lesson the scope of creativity. b)In economics, fixed costs are business expenses that are not dependent on the level of goods or services produced by the business. They tend to be time-related, such as salaries or rents being paid per month, and are often referred to as overhead costs. This is in contrast to variable costs, which are volume-related (and are paid per quantity produced). Variable costs are expenses that change in proportion to the activity of a business.Variable cost is the sum of marginal costs over all units produced. It can also be considered normal costs. Fixed costs and variable costs make up the two components of total cost. Direct Costs, however, are costs that can easily be associated with a particular cost object.However, not all variable costs are direct costs. For example, variable manufacturing overhead costs are variable costs that are indirect costs, not direct costs. Variable costs are sometimes called unit-level costs as they vary with the number of units produced. In economics and business decision-making, sunk costs are retrospective (past) costs that have already been incurred and cannot be recovered. Sunk costs are sometimes contrasted with prospective costs, which are future costs that may be incurred or changed if an action is taken. Both retrospective and prospective costs may be either fixed (continuous for as long as the business is in operation and unaffected by output volume) or variable (dependent on volume) costs. Note, however, that many economists consider it a mistake to classify sunk costs as "fixed" or "variable." For example, if a firm sinks $1 million on an enterprise software installation, that cost is "sunk" because it was a one-time thing and cannot be recovered once expended. A "fixed" cost would be monthly payments made as part of a service contract or licensing deal with the company that set up the software. The upfront irretrievable payment for the installation should not be deemed a "fixed" cost, with its cost spread out over time. Sunk costs should be kept separate. The "Variable costs" for this project might include CPU usage, etc.
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