What type of organizations are there

The Internal Revenue Service IRS gets involved because corporations are, in general, required to pay federal corporate income taxes on their net earning another technical term, pointing to a slightly different way to the idea of a surplus of revenue over expenses.

Section of the Internal Revenue Code lists several circumstances under which corporations are exempt from these taxes. Section c 3 -- the famous one -- describes corporations 1 serving charitable, religious, scientific or educational purposes 2 no part of the income of which "inures to the benefit of" anyone.

Tax-exempt nonprofit corporations can, and do, operate in all other particulars like any other sort of business. They have bank accounts; own productive assets of all kinds; receive income from sales and other forms of activity, including donations and grants if they are successful at finding that sort of support; make and hold passive investments; employ staff; enter into contracts of all sorts; etc.

There are some specialized tax rules and accounting practices that apply to nonprofit corporations. They are also subjected less to taxation and regulation compared to other types of businesses. However, if your business is a sole proprietorship, there is no distinction between your assets and those that belong to your company, which may be an issue if your company experiences financial challenges. Read more: What Is Sole Proprietorship? Definition, Advantages and Disadvantages. A partnership constitutes a formal agreement between two or more individuals who agree to run a business together.

It can also be established between two or more businesses or between businesses and individuals. The partnership agreement clearly states the amount of authority, potential profits and liabilities that each partner is due. Although the partners share benefits and responsibilities, one partner's choices can potentially affect the entire company. There are two types of partnerships—general and limited. In a general partnership, all partners assume liability for the company's potential losses, debt and other obligations.

In a limited partnership, some of the partners are solely investors who have no managerial control or liability. A limited partnership contains both general partners and limited partners. Corporations are companies that have been authorized to act as single entities. When a company's owner incorporates their business, they essentially separate their personal liability from that of the company.

Corporations have many of the rights and responsibilities that individuals enjoy, such as owning assets, hiring employees and paying taxes.

However, they are subject to state regulation, with a state-imposed board structure and taxation of both business and personal revenue. Owning a corporation is typically more flexible than other types of business, as you can transfer it in the form of stock.

However, the high number of rules and regulations that a corporation must follow typically means you may have to pay higher costs for accountants and attorneys compared to other types of businesses. As with corporations, limited liability companies separate the owners' liability from that of the company. They can be taxed either as corporations or as partnerships, and they can be owned by many different types of business entities, such as trusts, corporations, individuals and other LLCs.

Although similar in structure to S corporations, LLCs do not put their shareholders' personal belongings at risk, separating the personal liabilities from the ones that the company generates. By separating employees and functions into different departments, the company can perform different operations at once seamlessly.

In addition, a very clear organizational structure informs employees how best to get their jobs done. For example, in a hierarchical organization, employees will have to work harder at buying favor or courting those with decision-making power. In a decentralized organization, employees must take on more initiative and bring creative problem solving to the table. This can also help set expectations for how employees can track their own growth within a company and emphasize a certain set of skills—as well as for potential employees to gauge if such a company would be a good fit with their own interests and work styles.

The four types of organizational structures are functional, divisional, flatarchy, and matrix structures. Key elements of an organizational structure include how certain activities are directed in order to achieve the goals of an organization, such as rules, roles, responsibilities, and how information flows between levels within the company.

An example of an organizational structure is a decentralized structure, which gives individuals and teams high degrees of autonomy without needing a core team to regularly approve business decisions. There is no one best organizational structure, as it depends on the nature of the company and the industry it operates in.

There are entire fields of study based on how to optimize and best structure organizations to be the most effective and productive. Senior leaders should consider a variety of factors before deciding which type of organization is best for their business , including the business goals, industry, and culture of the company. American Journal of Industrial and Business Management.

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Business Essentials Guide to Mergers and Acquisitions. Business Business Essentials. Table of Contents Expand. What Is an Organizational Structure? Understanding an Organizational Structure.

Reducing budget costs due to lack of middle management Building relationships between staff and superiors Facilitating a quicker, easier decision-making process. Requiring extensive planning to be effective Causing confusion over who makes decisions Requiring contingency plans to resolve conflicts.

Divisional structure. Allowing divisions to work independently Meeting individual divisions' needs more quickly and specifically Promoting focus of specific products or services. Scaling limitations Duplicating resources or activities Decentralizing decision-making. Network structure. Giving the organization more agility and flexibility Allowing the core company to focus on what it's best at Helping lower costs through outsourcing.

Duplicating services and resources Creating confusion about specific roles and job functions Growing too complex and difficult to manage. Line structure. Fostering effective communication and stable environment Providing clearly defined responsibilities and lines of authority Adapting easily to changing conditions or situations. Limiting specialization Becoming rigid and inflexible Giving too much power to a manager.

Team-based structure. Helping streamline an organization's processes by breaking down silos Enabling more decision-making power with minimal management Increasing flexibility by focusing on experience instead of seniority. Decreasing organization consistency Limiting contact with other functions Increasing potential for conflict. Circular structure. Encouraging communication across all levels of staff Promoting free flow of information across the business Collaborating amongst departments, rather than separation.

Causing confusion over who to report to Requiring more resources and training Causing slowdown in decision-making. Process-based structure. Improving business' efficiency and speed Encouraging teamwork between departments Adapting easily to meet industry changes. Erecting barriers, or silos, between groups Limiting communication Requiring more resources to achieve process optimization.

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