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Types of Business Firms
1. Microeconomics studies particular firms, households, banks,
etc. Business organisations may be considered as firms or companies.
They produce goods or render services. They market and advertise
their products. They deal with government, courts, banks and insurance
companies.
2. There are three basic kinds of business firms: 1) proprietorships,
2) partnerships and 3) corporations. A proprietorship is simply a one
owner firm. The proprietorship form has several advantages, such as
simplicity of organisation, freedom to make all decisions, tax advantages,
etc. The main disadvantages are lack of experience and difficulty in
raising capital. Partnerships are firms owned jointly by two or more
persons who are co-owners of business. Advantages of the partnership
may be combined talents and skills, larger capital and tax advantages.
Disadvantages of this form are danger of disagreement, divided
authority, etc. A corporation is a firm owned by a group of people,
called shareholders. Advantages of the corporation are variety of skills,
abilities and ideas, ease of expansion. Disadvantages of this form of