Business Organization

You need to know the differences between the diverse business structure, especially regarding the cost and ease of establishment, the owner liability, business continuity, management control, the ease of adding capital, and tax implications.

There are five basic types of business organization:

1. Sole Proprietorship is the simplest business organization, where only one person that can have. In this way the owner of the business organizations are fully responsible for all debts of the business so that their obligations are not limited. In other words, the owner involving his personal wealth to settle all liabilities of the company.

2. Partnership is business organization in which two or more people combine money, property, expertise, and their labor to form a firm as owner (co-owns the property communion). Partnership can be classified as a general partnership or a limited partnership. General partnership running the business partnership, where the partners share the responsibility and liability management, as well as operating profit. The form of limited partnership provide some protection for a limited partner of the partnership obligations, but also limits their ability to participate in management decisions.

3. Corporation is a form of organization that is a legal entity. Corporation consists of those who have capital in the form of shares, so that the owners of the corporation are called shareholders. Basically, the corporation can be considered as a separate and distinct individuals. There are several types of corporate forms that can be adopted by a business but the most common form that is often used is a C corporation (usually simply referred to the corporation). The corporation provides a number of benefits to the owner, including limited liability for the obligations of the corporation, and the ease of capital increase.

4. Limited Liability Company (LLC) or Private Limited Company (Ltd) is a hybrid type of business entity used in many jurisdictions, with some differences from country to country. In all states, an LLC is a combination of a partnership and a corporation, though it's technically neither. An LLC allows the pass-through taxation of a partnership with the limited liability of a corporation. The owners of the company are referred to as members.

For example, Palm Kingdom made a profit of $75,000 from the sale of his business. Members of Palm Kingdom is Ajie, Irna, and Raina. Let's say that Ajie, Irna and Raina agree to split all business profits equally. Ajie takes $25,000 for his income, Irna takes $25,000 for her income and Raina takes $25,000 for her income. The Palm Kingdom won't pay taxes on its $75,000 profit. Instead, Ajie, Irna and Raina will each pay income taxes on their $25,000 shares.

LLC provide full limited liability like a corporation. Limited liability companies, like The Palm Kingdom, allow their members full exemption from personal liability for business debts and obligations. This means that the company can only be held responsible up to the amount of the company's assets much like a business bankruptcy.

5. Business Trust is a business organization created by a legal document with the aim to manage the assets of the company based on a partnership. There are three parties involved in the Business Trust :
- Settlor : is the party who owns the asset and deposit the trustee.
- Trustee : is the party who conduct the business trust
- Beneficiary : is the party that receives the benefits of the business trust activities

In Indonesia, the business trust activities should only be performed by a bank which has a core capital of at least Rp. 5 trillion. For example, on 21 September 2011 BNI was appointed to act as Trustee as paying agent for the management of the LNG contract in the Mahakam block.

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