Chapter 3: Problem 105

What is the predominant form of business organization in the united States in terms of number of firms? What is the predominant form in terms of volume of output?

Short Answer

Expert verified

In the United States, sole proprietorships are the predominant form of business organization in terms of the number of firms, while corporations are the predominant form in terms of volume of output.

Step by step solution

Identify the Types of Business Organizations

There are three primary types of business organizations in the United States: sole proprietorships, partnerships, and corporations.

Discuss the Characteristics of Sole Proprietorships

A sole proprietorship is a business owned and operated by a single individual. This type of business organization is the easiest to establish and manage, and it accounts for the majority of businesses in terms of the number of firms. However, sole proprietorships generally have relatively low output volumes compared to other types of business organizations due to their limited resources and smaller scale of operations.

Discuss the Characteristics of Partnerships

A partnership is a business organization where two or more individuals own and operate the business. Partnerships are more complex than sole proprietorships, as they involve shared decision-making and responsibility for the business. However, partnerships are less common than sole proprietorships in terms of the number of firms and produce a higher volume of output than sole proprietorships but lower than corporations.

Discuss the Characteristics of Corporations

A corporation is a legal entity separate from its owners, and it is owned by shareholders who have limited liability for the business's debts and obligations. Corporations are the most complex type of business organization to establish and manage. While they are not as common as sole proprietorships in terms of the number of firms, they typically generate the highest volume of output due to their large scale of operations and ability to raise capital from various sources.

Determine the Predominant Form in Terms of Number of Firms and Volume of Output

In terms of the number of firms, sole proprietorships are the predominant form of business organization in the United States. In terms of volume of output, the predominant form is corporations due to their large scale of operations and ability to generate high revenues.

Conclusion

The most common form of business organization in terms of the number of firms in the United States is sole proprietorships, while the most common form in terms of volume of output is corporations.

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