alternative forms of business organizations presentation

7 Organizational Structure Types (With Examples)

Updated: May 29, 2024, 5:39pm

Table of Contents

What is an organizational structure, 4 common types of organizational structures, 3 alternative organizational structures, how to choose the best organizational structure, frequently asked questions (faqs).

Every company needs an organizational structure—whether they realize it or not. The organizational structure is how the company delegates roles, responsibilities, job functions, accountability and decision-making authority. The organizational structure often shows the “chain of command” and how information moves within the company. Having an organizational structure that aligns with your company’s goals and objectives is crucial. This article describes the various types of organizational structures, the benefits of creating one for your business and specific elements that should be included.

Employees want to understand their job responsibilities, whom they report to, what decisions they can and should make and how they interact with other people and teams within the company. An organizational structure creates this framework. Organizational structures can be centralized or decentralized, hierarchical or circular, flat or vertical.

Centralized vs. Decentralized

Many companies use the traditional model of a centralized organizational structure. With centralized leadership, there is a transparent chain of command and each role has well-defined responsibilities.

Conversely, with a decentralized organizational structure, teams have more autonomy to make decisions and there may be cross-collaboration between groups. Decentralized leadership can help companies remain agile and adapt to changing needs.

Hierarchical vs. Circular

A hierarchical organization structure is the pyramid-shaped organization chart many people are used to seeing. There is one role at the top of the pyramid and the chain of command moves down, with each level decreasing in responsibilities and authority.

On the other hand, a circular organization chart looks like concentric circles with company leadership in the center circle. Instead of information flowing down to the next “level,” information flows out to the next ring of management.

Vertical vs. Flat

A vertical organizational chart has a clear chain of command with a small group of leaders at the top—or in the center, in the case of a circular structure—and each subsequent tier has less authority and responsibility. As discussed below, functional, product-based, market-based and geographical organizational structures are vertical structures.

With a flat organization structure, a person may report to more than one person and there may be cross-department responsibilities and decision-making authority. The matrix organizational structure described below is an example of a flat structure.

Benefits of Creating an Organizational Structure

There are many benefits to creating an organizational structure that aligns with the company’s operations, goals and objectives. Clearly disseminating this information to employees:

• Provides accountability
• Clarifies expectations
• Documents criteria for promotion
• Designates decision-making authority
• Creates efficiency
• Fosters collaboration

Essential Elements of Clear Organizational Structure

Regardless of the special type of organizational structure you choose, it should have the following components:

• Chain of command
• Roles and responsibilities
• Scope of control
• Decision-making authority
• Departments or teams within the organization

Functional/Role-Based Structure

A functional—or role-based—structure is one of the most common organizational structures. This structure has centralized leadership and the vertical, hierarchical structure has clearly defined roles, job functions, chains of command and decision-making authority. A functional structure facilitates specialization, scalability and accountability. It also establishes clear expectations and has a well-defined chain of command. However, this structure runs the risk of being too confining and it can impede employee growth. It also has the potential for a lack of cross-department communication and collaboration.

Product- or Market-Based Structure

Along with the functional structure, the product- or market-based structure is hierarchical, vertical and centralized. However, instead of being structured around typical roles and job functions, it is structured around the company’s products or markets. This kind of structure can benefit companies that have several product lines or markets, but it can be challenging to scale. It can also foster inefficiency if product or market teams have similar functions, and without good communication across teams, companies run the risk of incompatibility among various product/market teams.

Geographical Structure

The geographical structure is a good option for companies with a broad geographic footprint in an industry where it is essential to be close to their customers and suppliers. The geographical structure enables the company to create bespoke organizational structures that align with the location’s culture, language and professional systems. From a broad perspective, it appears very similar to the product-based structure above.

Process-Based Structure

Similar to the functional structure, the process-based structure is structured in a way that follows a product’s or service’s life cycle. For instance, the structure can be broken down into R&D, product creation, order fulfillment, billing and customer services. This structure can foster efficiency, teamwork and specialization, but it can also create barriers between the teams if communication isn’t prioritized.

Matrix Structure

With a matrix organizational structure, there are multiple reporting obligations. For instance, a marketing specialist may have reporting obligations within the marketing and product teams. A matrix structure offers flexibility, enables shared resources and fosters collaboration within the company. However, the organizational structure can be complex, so it can cause confusion about accountability and communication, especially among new employees.

Circular Structure

Similar to the functional and product-based structure, a circular structure is also centralized and hierarchical, but instead of responsibility and decision-making authority flowing down vertically, responsibility and decision-making authority flow out from the center. A circular structure can promote communication and collaboration but can also be confusing, especially for new employees, because there is no clear chain of command.

Organic Structure

Unlike vertical structures, this structure facilitates communication between and among all staff. It is the most complex, but it can also be the most productive. Although it can be challenging to know who has ultimate decision-making authority, it can also foster a positive company culture because employees don’t feel like they have “superiors.” This structure can also be more cost-efficient because it reduces the need for middle managers.

There is no one “right” organizational structure. When deciding which structure will work best for your company, consider the following:

• Current roles and teams within the company. How are job functions currently organized? Does it foster communication and productivity? Does it impede or encourage employee growth?
• Your strategic plan. What are your company’s goals for the short-term and long-term?
• Feedback from employees, leadership and other stakeholders. What do those within your company say about how the company is structured? What feedback do you have from other stakeholders, such as customers and suppliers?
• Alignment. What structure will best support your strategic plans and address any feedback received?

What is the most common organizational structure?

A functional organizational structure is one of the most common organizational structures. If you are still determining what kind of structure to use, this organizational structure can be an excellent place to start.

What is the difference between an organizational structure and an organizational chart?

An organizational chart is a graphic that depicts the organizational structure. The chart may include job titles or it can be personalized to include names and photos.

What are the four types of organizational structures?

A functional—or role-based—structure is one of the most common organizational structures. The second type—the product- or market-based structure—is also hierarchical, vertical and centralized. Similar to these is the third structure—the process-based structure—which is structured in a way that follows a product’s or service’s life cycle. Lastly, the geographical structure is suitable for businesses with a broad geographic footprint.

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Christine is a non-practicing attorney, freelance writer, and author. She has written legal and marketing content and communications for a wide range of law firms for more than 15 years. She has also written extensively on parenting and current events for the website Scary Mommy. She earned her J.D. and B.A. from University of Wisconsin–Madison, and she lives in the Chicago area with her family.

Alternative Forms of Business Organizations

Discover alternative business organizations and find your perfect fit! Uncover the pros and cons of partnerships, corporations, and more.

Understanding Business Organization Forms

Choosing the right business structure is a crucial decision for any entrepreneur or business owner. The form of organization selected can have significant implications for legal, financial, and operational aspects of the business. This section aims to provide an understanding of various business organization forms, highlighting the importance of selecting the right structure and comparing traditional and alternative business organizations.

Importance of Choosing the Right Business Structure

Selecting the appropriate business structure is essential for several reasons. First and foremost, it determines the legal and financial responsibilities of the business owner(s). Different structures have varying levels of liability protection, tax obligations, and reporting requirements.

Choosing the right business structure also impacts the ability to raise capital, attract investors, and obtain financing. Certain structures may be more favorable for accessing funding sources or establishing credibility with potential partners or lenders.

Additionally, the chosen structure affects the ease of management and decision-making within the organization. Some structures allow for centralized decision-making, while others provide more flexibility and shared authority.

Traditional vs. Alternative Business Organizations

Traditionally, businesses have relied on structures such as sole proprietorships, partnerships, and corporations. However, alternative business organizations have gained popularity in recent years due to their unique features and benefits.

Traditional business organizations have been the go-to options for many entrepreneurs. Sole proprietorships offer simplicity and complete control, partnerships allow for shared responsibilities and resources, and corporations provide strong legal protection and potential for growth. However, these structures may not be suitable for everyone, as they come with certain limitations and challenges.

Alternative business organizations offer innovative alternatives to traditional structures. Limited Liability Companies (LLCs) combine the limited liability protection of corporations with the flexibility and simplicity of partnerships. LLCs have become increasingly popular due to their favorable tax treatment and reduced administrative requirements.

Cooperatives, another alternative business organization, prioritize member participation and benefit-sharing. They are typically formed by individuals or businesses with a shared interest who work together for mutual benefit. Cooperatives can be advantageous in industries such as agriculture, consumer goods, and housing.

Understanding the distinctions between traditional and alternative business organizations is essential for entrepreneurs and business owners. By considering the unique features, advantages, and disadvantages of each structure, individuals can make informed decisions that align with their specific goals and circumstances.

Sole Proprietorship

A sole proprietorship is a common form of business organization where an individual operates their business as the sole owner. In this structure, there is no legal distinction between the individual and the business entity. Let's explore the definition and characteristics of a sole proprietorship, as well as its pros and cons.

Definition and Characteristics

A sole proprietorship is an unincorporated business owned and operated by a single individual. It is the simplest and most straightforward form of business organization. In a sole proprietorship, the owner is personally responsible for all aspects of the business, including finances, operations, and liabilities.

One of the key characteristics of a sole proprietorship is the lack of legal separation between the owner and the business. This means that the owner has unlimited personal liability for any debts or obligations of the business. Additionally, the owner has complete control and decision-making authority over the business without having to consult with partners or shareholders.

Pros and Cons of Sole Proprietorship

Sole proprietorships offer several advantages, making them an attractive option for many entrepreneurs:

Pros of Sole Proprietorship ‍

Easy and inexpensive to set up

Full control and decision-making authority

Direct and straightforward taxation

Flexibility in managing and adapting the business

Minimal government regulations and reporting requirements

However, there are also some disadvantages to consider when choosing a sole proprietorship:

Cons of Sole Proprietorship

‍ Unlimited personal liability for business debts

Limited access to capital and financing options

Potential difficulty in attracting investors

Sole responsibility for all aspects of the business

Lack of continuity in case of owner's absence or incapacity

It's important to carefully weigh the pros and cons of a sole proprietorship before deciding on the appropriate business structure. While it offers simplicity and control, the personal liability and limited growth potential should be taken into consideration.

Understanding the definition and characteristics, as well as the pros and cons, of a sole proprietorship is essential for any individual considering this form of business organization. By thoroughly evaluating their unique needs and goals, entrepreneurs can make an informed decision about whether a sole proprietorship is the right fit for their business venture.

Partnership

Partnerships are a common form of alternative business organization where two or more individuals come together to run a business. In a partnership, the partners share the responsibilities, profits, and losses of the business. Let's delve into the definition and types of partnerships, as well as the pros and cons associated with this business structure.

Definition and Types of Partnerships

A partnership is a legal business entity formed by two or more individuals who agree to share the ownership, management, and profits of a business. The partners contribute resources, such as capital, skills, or labor, to the partnership.

There are three main types of partnerships:

• General Partnership: In a general partnership, all partners have equal rights and responsibilities in managing the business. They share the profits and losses according to the terms outlined in the partnership agreement.
• Limited Partnership: A limited partnership consists of general partners and limited partners. General partners have unlimited liability and are actively involved in the day-to-day operations of the business. Limited partners, on the other hand, have limited liability and are typically passive investors.
• Limited Liability Partnership (LLP): An LLP combines elements of partnerships and corporations. It offers limited liability protection to all partners, shielding them from personal liability for the partnership's debts and obligations. LLPs are often preferred by professionals, such as lawyers and accountants.

Pros and Cons of Partnerships

Partnerships offer several advantages and disadvantages that should be carefully considered before choosing this business structure.

Pros of Partnerships:

‍ Shared management responsibilities

Combined skills and resources

Flexibility in decision-making

Shared business risks

Simpler and less costly to establish compared to corporations

Cons of Partnerships:

Disadvantages

‍ Unlimited liability for general partners

Potential conflicts between partners

Shared profits and decision-making

Limited life span

Difficulty in raising capital for expansion

Understanding the definition, types, and pros and cons of partnerships is crucial in deciding whether this alternative business organization is the right fit for your venture. It's important to consult with legal and financial professionals to ensure you make an informed decision that aligns with your business goals and aspirations.

Corporation

A corporation is a legal entity that is separate from its owners, known as shareholders. It is formed by filing the necessary documents with the state or country where it operates. Corporations have several distinct features that differentiate them from other forms of business organizations.

Definition and Types of Corporations

A corporation is a business organization that is owned by shareholders and managed by a board of directors. It is considered a separate legal entity, meaning it can enter into contracts, own assets, and incur liabilities in its own name. There are different types of corporations, including:

• C-Corporation : This is the most common type of corporation. It is subject to double taxation, meaning the corporation itself is taxed on its profits, and the shareholders are also taxed on any dividends they receive.
• S-Corporation : This type of corporation is designed to avoid double taxation. Profits and losses are instead passed through to the shareholders, who report them on their personal tax returns.
• B-Corporation : B-Corporations, also known as Benefit Corporations, are a relatively new type of corporation that seeks to balance profit-making objectives with social and environmental goals. They are legally required to consider the impact of their decisions on various stakeholders, including employees, communities, and the environment.
• Nonprofit Corporation : Nonprofit corporations are formed for charitable, educational, religious, or scientific purposes. They are exempt from paying taxes on their income, and any surplus is reinvested back into the organization's mission.

Pros and Cons of Corporations

Corporations offer several advantages and disadvantages that prospective business owners should consider:

Understanding the definition, types, and pros and cons of corporations is essential for individuals considering this form of business organization. It is crucial to carefully evaluate the specific needs and goals of the business before deciding on the most suitable structure. Consulting with legal and financial professionals can provide additional guidance in making an informed decision.

Limited Liability Company (LLC)

An alternative form of business organization that has gained popularity in recent years is the Limited Liability Company (LLC). This hybrid entity combines the benefits of both partnerships and corporations, offering business owners flexibility and liability protection.

An LLC is a legal structure that provides its owners, known as members, with limited liability protection. This means that the personal assets of the members are generally protected from the debts and liabilities of the company. In essence, the members' liability is limited to the amount they have invested in the company.

Some key characteristics of an LLC include:

• Flexibility : LLCs offer flexibility in terms of management and ownership. Members can choose to manage the company themselves, or they can appoint managers to handle day-to-day operations.
• Pass-through Taxation : LLCs enjoy pass-through taxation, meaning that the company's profits and losses are passed through to the members, who report them on their individual tax returns. This avoids the issue of double taxation that corporations often face.
• Limited Compliance Requirements : Compared to corporations, LLCs generally have fewer compliance requirements, making them an attractive option for small businesses.

Pros and Cons of LLCs

LLCs offer several advantages, but they also come with some drawbacks. Let's take a closer look at the pros and cons of forming an LLC:

It's important to weigh the advantages and disadvantages of forming an LLC based on your specific business needs and goals. Consulting with a legal or financial professional can help you make an informed decision and ensure compliance with the relevant laws and regulations.

By understanding the definition, characteristics, and pros and cons of forming an LLC, business owners can determine if this alternative business organization is the right fit for their venture.

Cooperative

A cooperative is an alternative form of business organization that operates based on the principles of cooperation and mutual assistance. Unlike traditional business structures, cooperatives prioritize the collective interests of their members rather than maximizing profits for individual shareholders. Let's explore the definition and types of cooperatives, along with their pros and cons.

Definition and Types of Cooperatives

A cooperative is a business entity owned and operated by a group of individuals, known as members, who pool their resources and efforts to achieve common goals. The primary objective of a cooperative is to provide goods or services to its members at the most favorable terms possible.

There are various types of cooperatives, each tailored to meet the specific needs of different industries and communities. Some common types of cooperatives include:

Pros and Cons of Cooperatives

Cooperatives offer several advantages for their members, but they also come with certain challenges. Let's take a closer look at the pros and cons of this alternative business organization:

Pros of Cooperatives

• Member Control : Cooperatives are democratically governed, with members having an equal say in decision-making. This ensures that the cooperative operates in the best interests of its members.
• Shared Benefits : As members, individuals not only benefit from the cooperative's goods or services but also share in the profits generated. This can result in cost savings, dividends, or patronage refunds.
• Risk Mitigation : By pooling resources and sharing risks, cooperatives provide a sense of security to their members. This can be particularly valuable in industries with uncertain market conditions.
• Community Development : Cooperatives often contribute to the social and economic development of their communities. They prioritize local needs and reinvest profits back into the community.

Cons of Cooperatives

• Limited Access to Capital : Cooperatives may face challenges in raising capital due to limitations on external investment. Funding options are often limited to member contributions and loans.
• Decision-Making Challenges : Achieving consensus among members can be time-consuming and challenging, especially in larger cooperatives. Differences in opinions may delay decision-making processes.
• Member Engagement : Active participation and engagement of members are crucial for the success of cooperatives. Lack of involvement can hinder the cooperative's progress and growth.
• Potential for Conflict : Conflicts may arise if members have conflicting interests or if there is uneven participation in the cooperative's activities. Effective communication and conflict resolution mechanisms are essential.

Cooperatives provide an alternative approach to business organization, emphasizing cooperation, shared benefits, and community development. By understanding the various types of cooperatives and weighing the pros and cons, individuals can determine if this model aligns with their objectives and values.

https://openbooks.lib.msu.edu/financialmanagement/chapter/alternative-forms-of-business-organizations/

https://tradeconnectivity.blogspot.com/2013/07/alternative-forms-of-business.html

https://www.e-elgar.com/shop/gbp/research-handbook-on-partnerships-llcs-and-alternative-forms-of-business-organizations-9781783474394.html

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2 Alternative Forms of Business Organizations

Lindon Robison

Learning goals. After completing this chapter, you should be able to: (1) know the different forms of business organizations; (2) compare the advantages and disadvantages of alternative types of business organizations; and (3) identify how alternative forms of business organizations can influence a firm’s ability to achieve its financial goals and objectives.

Learning objectives. To achieve your learning goals, you should complete the following objectives:

• Learn about the advantages and disadvantages of a sole proprietorship.
• Study the characteristics of firms best suited to be organized as sole proprietorships.
• Learn about the advantages and disadvantages of partnerships.
• Study the characteristics of firms best suited to be organized as partnerships.
• Learn about the advantages and disadvantages of C corporations and S corporations.
• Study the characteristics of firms best suited to be organized as C corporations and S corporations.
• Learn about the advantages and disadvantages of a Limited Liability Company (LLC).
• Study the characteristics of firms best suited to be organized as LLCs.
• Learn about the advantages and disadvantages of a cooperative.
• Study the characteristics of firms best suited to be organized as cooperatives.
• Learn about the advantages and disadvantages of a trust.
• Study the characteristics of firms best suited to be organized as trusts.

Introduction

The way a business is organized influences its ability to reach its goals and objectives. This chapter focuses on legal forms of business organizations that are widely used in the U.S. These include sole proprietorships, general and limited partnerships, limited liability corporations (LLCs), S corporations, and C corporations. Partnerships, LLCs, and C corporations are found across a wide spectrum of business types and sizes. LLCs are becoming increasingly important in the production agricultural sector, particularly with multi-generation family businesses. In family businesses, legal business structures which facilitate intergenerational transfer of assets has become particularly important.

Characteristics of businesses organizations that influence the ability of a firm to reach its goals and achieve its mission include: 1) who makes the management decisions; 2) how much flexibility does it have in its production, marketing, consumption, and financing activities; 3) its liability exposure; 4) its opportunities for acquiring capital; 5) how the life of the business is defined; 6) how the death of its owners affects the firm; 7) methods available for transferring the current owners’ interest to others; and 8) Internal Revenue Service definitions of business profits and their taxation. Thus, the way a firm is legally organized provides the framework to make financial management decisions.

Sole Proprietorship

The sole proprietorship is a common organization form especially used by small businesses. A sole proprietorship is a business that is owned and operated by a single individual. Most sole proprietorships are family-owned businesses. The advantages of the sole proprietorship organization include:

• It is easy and inexpensive to form and operate administratively (simplicity);
• It offers the maximum managerial control; and
• Business income is taxed as ordinary (personal) income to the owner.

The disadvantages of the sole proprietorship include:

• It is difficult to raise large amounts of capital;
• There is unlimited liability;
• It is difficult to transfer ownership; and
• The company has a limited life that is linked to the life of the owner.

Sole proprietorships are typically organized informally and require relatively little paperwork to begin operations. It is the most simple among the alternative business organizations to understand and use. To begin operation, the individual declares himself/herself to be a business. In many cases, a license will be required to operate the business, but often the business begins simply by “opening its door.” The day-to-day operations of the firm are also organized informally and may be administered as the owner desires, subject to legal and tax restrictions. For example, certain taxes must be paid by specific dates. The vast majority of regulations small businesses face are independent of the legal form of the business. Metrics such as business size, number of employees, and location determine which regulations business face.

Since sole proprietorships are owned by a single individual, this form of business organization offers the maximum management control. In small firms, the owner of the business is often involved in all aspects of the business: purchasing, inventory control, production, sales, accounting, personnel and customer relations, as well as financial and general management. While the large amount of owner control can be a strength in small firms, it often turns out to be a disadvantage as firms begin to grow and the owner is no longer able to manage all aspects of the business. The owner must then hire competent staff to manage specific aspects of the business.

Additionally, the business is restricted by the financial resources available to the owner. This can restrict the startup of the business as well as its growth over time. In many cases, substantial cash outlays are required to make the capital purchases (land, facilities, equipment, cars, offices) to start the business and to provide initial overhead expenses (salaries, wages, supplies) until the business gets going. Further, it frequently takes two or three years before the business begins to show a profit. The owner of the business has to obtain these funds using his/her own equity (funds owned by the individual) and/or by borrowing funds, and borrowing requires collateral in the form of owner equity The amount that can be borrowed depends on the level of equity as well as the projected cash flow generated by the business. The lack of available financial capital for starting and expanding the business is a major drawback in the sole proprietorship. The profits from the business are taxed as personal income to the owner.

Sole proprietorships are subject to unlimited liability which means that the liability for business debts extends beyond the owner’s investment in the firm. For example, if the sole proprietorship is unable to cover its debts and obligations, creditors have the right to collect the personal assets that are not part of the business or other businesses of the owner. The owner may be forced to liquidate assets, such as a personal savings account, a vacation home, or other personal assets just to cover the firm’s obligations.

Another disadvantage of a sole proprietorship is that it has a limited life that corresponds to life of the owner. The owner may sell assets from the business to another sole proprietorship or business. However, if the business is not terminated prior to the death of the owner, then after the proprietor’s death, the assets remaining in the firm will be distributed according to the owner’s will or comparable instrument. When the owner dies, the business is terminated.

Partnerships

A general partnership is a business that is owned and operated by two or more individuals. The partners contribute to the business, share in management, and divide any profit. Partnerships are usually created by written contract among the partners, but they can be legally recognized even without a written agreement. If the partnership owns real property, the partnership agreement should be filed in the county where the property is located.

Advantages of partnerships include:

• They are easy and inexpensive to form and operate administratively;
• They have the potential for large managerial control;
• Business income is taxed as ordinary (personal) income to the owner; and
• A partnership may be able to raise larger amounts of capital than a sole proprietorship.

The disadvantages of a general partnership include:

• Raising capital can still be a constraint;
• The company has limited life.

The advantages and disadvantages of a general partnership are similar to the sole proprietorship. Partnerships are generally easy and inexpensive to set up and operate administratively. Partnership operating agreements are critical. Like sole proprietorships, profit allocated to the partners is based upon their share in the business.

Managerial control resides with the partners. This feature can be an advantage or disadvantage depending on how well the partners work together and the level of trust in each other. Control by any one partner is naturally diluted as the number of partners increases. Partnerships are separate legal entities that can contract in their own name and hold title to assets

The challenge to partnerships extends beyond possible conflicts with the partners. Divorce and other disputes may threaten the survival of the partnership when a claimant to a portion of the business’s assets demands his/her equity.

Unlimited liability remains a strong disadvantage for a general partnership. All partners are liable for the debts of the firm. Due to this unlimited liability, the risks of the business may be spread according to the owners’ equity rather than according to their interests in the business. This risk becomes an actual obligation whenever the partners are unable to satisfy their shares of the business’s obligations.

Increasing the number of partners can increase the amount of capital that can be accessed by the firm. More partners tends to mean more financial resources and this can be an advantage of a partnership compared to a sole proprietorship. Still, it is generally difficult for partnerships to raise large amounts of capital—particularly when liability is not limited.

Ownership transfer and limited life continues to be a problem in partnerships; however, it may be possible to build provisions into the partnership that will allow it to continue operating if one partner leaves or dies. In some cases, parent-child partnerships can ease the difficulties of ownership transfer.

A limited partnership is another way businesses can organize. Limited partnerships have some partners (limited partners) who possess limited liability; limited partners do not participate in management of the firm. There must be at least one general partner (manager) who has unlimited liability. Because of the limited liability feature for limited partners, this type of business organization makes it easier to raise capital by adding limited partners. These limited partners are investors and make no management decisions in the firm.

One difficulty occurs if the limited partners wish to remove their equity from the firm. In this instance, they must find someone who is willing to buy their share of the partnership. In some cases, this may be difficult to do. Another difficulty is that the Internal Revenue Service (IRS) may tax the limited partnership as a corporation if it believes the characteristics of the business organization are more consistent with the corporate form of business organization.

In production agriculture, family limited partnerships serve a number of objectives. For example, parents contemplating retirement may wish to maintain their investment in a farm business but limit their liability and be free of management concerns. To reduce their liability exposure and be free of managerial responsibilities, parents can be limited partners in a business where younger family members are the general partner.

The joint venture is another variation of the partnership, usually more narrow in function and duration than a partnership. The law of partnership applies to joint ventures. The primary purpose of this form or organization is to share the risks and profits of a specific business undertaking.

Corporations

A corporation is a legal entity separate from the owners and managers of the firm. Three fundamental characteristics distinguish corporations from proprietorships and partnerships: (1) the way they are owned and managed, (2) their perpetual life, and (3) their legal status separate from their owners and managers.

A corporation can own property, sue and be sued, contract to buy and sell, and be fined—all in its own name. The owners usually cannot be made to pay any debts of the corporation. Their liability is limited to the amount of money they have paid or promised to pay into the corporation.

Ownership in the corporation is represented by small claims (shares) on the equity and profit stream of the firm.

The two most common types of claims on the equity of the firm are common and preferred stock. The claims of preferred stockholders takes preference over equity claims of common stockholders in the event of the corporation’s bankruptcy. Preferred stockholders must also receive dividends before other equity claims. The preferred stockholders’ dividends are usually fixed amounts paid at regular intervals that rarely change. In most cases, preferred stock has an accumulated preferred feature. This means that if the firm fails to pay a dividend on preferred stock, at some point in time the corporation must make up the payment to its preferred stockholders holders before it can make payments to other equity claims.

Common stock equity claims are the last ones satisfied in the event of the corporation’s bankruptcy. These are residual claims on the firm’s earnings and assets after all other creditors and equity holders have been satisfied. Although it appears that common stock holders always get the “leftovers,” the good news is that the leftovers can be substantial in some cases because of the nature of the fixed payments to creditors and other equity holders.

Large corporations are usually organized as Subchapter C corporations.

The advantages of a C corporation include:

• There is limited liability;
• The corporation has unlimited life;
• Ownership is easily transferred; and
• It may be possible to raise large amounts of capital.

The disadvantages of a C corporation include:

• There is double taxation; and
• It is expensive and complicated to begin operations and to administer.

Seeing Double

Earnings from the corporation are taxed using a corporate tax rate. When earnings are distributed to the shareholders in the form of dividends, the earnings are taxed again as ordinary income to the shareholder. For example, suppose a corporation, whose ownership is divided among its 3000 shareholders, earns $1,000,000 in taxable profits for the year and is in a flat 40-percent tax bracket. Profits per share equal $1,000,000/3000—or $333.33. The corporation pays 40% of $1,000,000—or $400,000—in taxes to the government. Taxes per share equal $400,000/3000—or $133.33.

Now suppose the corporation distributes its after-tax profits to its 3,000 shares in the form of dividends. Each shareholder would receive a dividend check of $600,000/3,000 = $200. The $200 dividend income received by each shareholder would then be taxed as ordinary personal income. If all the shareholders were in the 30-percent tax bracket, then each would pay 30% of $200 or $60 in taxes, leaving each shareholder with $140 in after-tax dividend income.

So what is the total tax rate paid on corporate earnings? Dividing the taxes paid by the corporation and the shareholder by the profit per share, the total tax rate is ($133.33+$60)/$333.33 = 58%, a higher rate than would be paid on personal income of the same amount.

One of the primary strengths of the corporate form of business organization is that the most the owners of the firm (shareholders) can lose is what they have invested in the firm. This limited liability feature means that as a shareholder, one’s personal assets beyond the investment in the corporation can’t be taken to satisfy the corporation’s debts or obligations.

Ownership can easily be transferred by selling shares in the corporation. Likewise, the corporation has an unlimited life because when an owner dies, the ownership shares are passed to his/her heirs. The common separation of ownership and management in large corporations helps to ease the ownership transfer as the firm management process never ceases.

The easy transfer of ownership, separation of management and ownership, and limited liability features of a corporation combine to create a business structure that is designed to raise large sums of equity capital. Investors in large corporations don’t have to become involved in management of the firm. Their risk is limited to the amount of funds invested in the firm, and their ownership interest can be transferred by selling their shares in the firm.

Corporations are more expensive and complicated to set up and administer than sole proprietorships or partnerships. Corporations require a charter, must be governed by a board of directors, pay legal fees, and meet certain accounting requirements. Despite the relatively high setup cost, the primary disadvantage of the corporate form of business is that income generated by the corporation is subject to double taxation.

However, there is a limit on corporate earnings that are double-taxed. The corporation may pay reasonable salaries, and these are deducted from the corporation’s profits. Therefore, salaries paid to corporate workers and operators are not taxed at the corporate level. In some cases, the corporation’s entire net profit may be offset by salaries to the owners so that no corporate income tax is due. On the other hand, if the corporation pays dividends to the shareholders, those payments are subject to corporate-level income tax. However, the individual does not have to pay self-employment tax on the dividends. And, qualifying dividends (and most United States Corporation dividends can fit into this definition) are taxed at capital gains rates and not the individual’s top marginal tax rate. Finally, dividends paid to a shareholder that actively participates in the business are not subject to either the 0.9 percent Medicare surtax on earnings or the 3.8 percent tax on net investment income that are levied on higher-income taxpayers.

Another disadvantage of corporations has to do with the fact that the managers do not own the firm. Managers, who control the resources of the firm, may use them for their own benefit. For example, top management may build extravagantly large headquarters and buy fleets of jets and limousines for transportation. If less were spent on perquisites, then the income of the corporation would be higher. Higher income allows higher dividends to be paid to the owners (shareholder).

The (potential) self-serving behavior by management running contrary to the interests of stockholders is an example of a principal-agent problem. Methods of dealing with the principal-agent exist. One way is to hire auditors to monitor the use of firm resources. Further, a corporation has a board of directors responsible for hiring, evaluating, and removing top management. Boards are often ineffective because they meet infrequently and may not have access to the information necessary to fulfill their responsibilities. Additional problems exist if management personnel also sit on the board of directors.

Another way to deal with the principal-agent problem in corporations is to align the interests of management with those of shareholders. This is accomplished by basing the compensation of management on the value of the firm’s stock. A chief executive officer could receive stock options as a part of his/her compensation package. If the stock price rises, the value of the options increase, which benefits the manager financially. The shareholders also benefit when the stock price increases. Such an arrangement may reduce the principal-agent problem. However, very high executive compensation can often trigger criticism from external groups such as consumer or labor activists.

Limitations of linking management’s compensation to the value of its stock have been illustrated by Enron and Tyco corporations. These corporations inflated the value of their stocks and eventually bankrupted themselves and lost the investments of their employees. It seems there is still a lot to be learned about aligning the interests of corporate managers and shareholders.

Many small businesses, including farms, use the C corporation structure and operate much like partnership. This is frequently done for reasons of expensing and intergenerational transfer.

The corporation will need to be “capitalized” by some level of equity funds from the shareholders. It is common practice among lenders to require personal guarantees by the owners of small corporations before providing funds to the business. This essentially eliminates the limited liability features for those shareholders. As one might expect, due to these difficulties, many small corporations are not able to generate large amounts of capital by simply selling ownership shares. As a result, many small corporations do not really receive the full benefits of corporate organization but are still subject to the disadvantages, namely double taxation.

C corporations and S corporations. Any corporation is first formed under the laws of a particular state. From the standpoint of state business law, a corporation is a corporation. However, there are two types of for-profit corporations for federal tax law purposes:

• C corporations: What we normally consider “regular” corporations that are subject to the corporate income tax
• S corporations: Corporations that have filed a special election with the IRS. They are not subject to corporate income tax. Instead, they are treated similarly (but not identically) to partnerships for tax purposes.

There is an alternative form of corporate business organization that is often more desirable from a small business perspective. Subchapter S Corporations have limited liability protection, but the income for the business is only taxed once as ordinary income to the individual (Wolters Kluwer. n.d.).

There are restrictions on what type of firms can be organized as Subchapter S corporations. To do so, it must meet several requirements: (1) cannot have more than 100 shareholders; (2) may have only one class of stock; (3) cannot have partnerships or other corporations as stockholders; and (4) may not receive more than 20 percent of its gross receipts from interest, dividends, rents, royalties, annuities, and gains from sales or exchange of securities. In agriculture, these restrictions usually mean that only family or closely-held farm businesses can achieve Subchapter S status.

Federal income tax rules for Subchapter S corporations are similar to regulations governing partnerships and sole proprietors. However, corporations may provide certain employee benefits that are tax deductible. Accident and health insurance, group life insurance, and certain expenditures for recreation facilities all qualify. However, these benefits may be taxable to the employees and subsequently to the shareholders.

There is greater continuity for businesses organized under Subchapter S than for sole proprietorships or partnerships. Upon the death of shareholders, their shares of the corporations are transferred to the heirs and the Subchapter S election is maintained. Surveys suggest that the major reason farms incorporate is for estate planning. The corporate form allows for the transfer of shares of stock either by sale or gift. This is much easier than transferring assets by deed.

Limited Liability Company

The Limited Liability Company (LLC) is a relatively new form of business organization. An LLC is a separate entity, like a corporation, that can legally conduct business and own assets. The LLC must have an operating agreement which regulates its business activities and the relationship among its owners (referred to as members). There are no restrictions on the number of members or the members’ identities. LLCs are subject to disclosure, record keeping, and reporting requirements that are similar to a corporation.

The attractive feature of the LLC is that all members obtain limited liability, but the entity is taxed as a general partnership. The LLC is similar in most respects to the Subchapter S corporation. The primary differences are: 1) the LLC has less restrictive membership requirements; and 2) the LLC is dissolved in the event of transfer of interest or death unless members vote to continue the LLC. Table 2.1 summarizes the primary characteristics of the business organizations discussed so far.

Table 2.1. Comparison of Business Organizations

Cooperative

A cooperative is a business that is owned and operated by member patrons. Generally, cooperatives are thought to operate at cost, with all profits going to member patrons. The profits are usually redistributed over time in the form of patronage refunds. Cooperatives often appear to operate as profit making organizations much the same as other forms of business organization. Agricultural cooperatives do not face the same anti-trust restrictions as non-cooperative businesses, and they enjoy a different federal income tax status. In most instances, the concepts and analysis techniques covered in this course will be relevant to financial management in cooperatives.

A trust transfers legal title of designated assets to a trustee, who is then responsible for managing the assets on the beneficiaries’ behalf. The management objectives can be spelled out in the trust agreement. Beneficiaries retain the right to possess and control the assets of the trust and to receive the income generated by the properties owned by the trust. Beneficiaries hold the trust and personal property, rather than title to the assets. The legal status of certain types of land trusts are unclear in some states.

Farm Business Organization Types in US Agriculture

The USDA defines a farm as a place that generates at least $1,000 value of agricultural products per year. In 2007, farms generating between $1,000 and $10,000 of agricultural products made up 60% of the 2.2 million U.S. farms. Farms producing $500,000 or more in 2007 dollars generated 96% of the value of U.S. agricultural production.

Table 2.2 shows the percentage of farms by organizational type and their share of aggregate agriculture product sales according to the 2007 Census of Agriculture. Sole proprietorships are the dominant form of business organization measured by farm count (86.5%) but have only 49.6% of the value of agricultural production. Partnerships and family corporations make up 20.8% of farms but have 43% of the value of agricultural production. Non-family corporations, part of the “other organization” category, accounted for 0.4% of farms and 6.5% of the value of agricultural production.

Table 2.2. Farm Business Organization Types

(USDA Census of Agriculture, 2007. Farms in US 1,925,300)

More generally, about 80 percent of all businesses (agriculture and non-agriculture) are organized as sole proprietorships while only around 10 percent of businesses are organized as corporations. Conversely, about 80 percent of business sales come from corporations while sole proprietorships account for only about 10 percent of business sales.

Summary and Conclusions

Recognizing that we can offer financial management tools that meet a limited set of business organizations, we purposely focus in this text on small to medium-size businesses. As a result, we focus on firms that depend on internal capital and exercise the maximum control of the firm.

• Discuss the advantages and disadvantages of organizing a business as a sole proprietorship versus a C corporation.
• Limited partnerships, limited liability companies, and Subchapter S corporations are also alternative forms of business organization. Discuss the advantages and/or disadvantages these organizations offer relative to sole proprietorships, general partnerships and C corporations.
• Approximately 85% of all farm businesses in the US are organized as sole proprietorships. Explain why the organization form of farm businesses in the U.S. is dominated by sole proprietorships.
• Pick an agricultural commodity or product that is produced in the food industry. Describe the different production, processing and marketing steps for the commodity or product and how they are typically coordinated.
• Can you explain in Table 2.2 why corporations tend to control more land than partnerships and sole proprietorships?
• What are the advantages or disadvantages of a family corporation compared to a regular corporation?
• More than 50% of the stock is owned by persons related by blood or marriage. ↵
• Nonfamily farms, estates or trusts, grazing associations, American Indian Reservations, etc. ↵

Financial Management for Small Businesses: Financial Statements & Present Value Models Copyright © 2020 by Lindon Robison is licensed under a Creative Commons Attribution 4.0 International License , except where otherwise noted.

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11 Critical Types of Business Presentations (+ Templates)

Learn about the different types of business presentations with examples that drive results. Discover how to choose the right type of presentation for your use case.

Dominika Krukowska

8 minute read

Short answer

What are the main types of business presentations?

There are 11 main types of business presentations:

• Pitch deck presentations
• Sales deck presentations
• Product marketing presentations
• White papers
• Case studies
• Report presentations
• Education & academic presentations
• Business proposal presentations
• Sports sponsorship proposals
• Business plan presentations

You need the right collateral for every aspect of your business in order to succeed.

In today's business world, delivering a compelling presentation isn't just a nice skill - it's a vital one. But if you're not familiar with all the types of presentations your business might need, it's like trying to build a house without all the necessary tools.

Some parts of your business might not get the support they need to stand strong. This can lead to unclear messages, disengaged audiences, and missed opportunities.

That's where this post comes in. Consider it your blueprint for building a solid presentation foundation. You'll learn about all the different types of business presentations, when to use them, and how to make them work wonders for you. In just a few minutes, you'll be ready to turn every presentation into a sturdy pillar for your business success.

Let’s get started!

What are the main business presentation types?

Business presentations come in various forms, each serving a unique purpose and fitting into a specific stage of the sales funnel.

There is a basic set of presentations that no business can flourish without. You should become familiar with these critical presentation types.

11 essential types of business presentations:

1. Pitch deck presentations

Pitch deck presentations are designed to showcase a product, startup, or idea to potential investors. They are typically used during fundraising rounds and are crucial for securing the necessary capital for your business.

Here’s an example of a pitch deck presentation:

Cannasoft - Investment pitch deck

A hard-hitting investment deck of a publicly traded tech company dedicated to medical cannabis manufacturers.

If you want to learn more about pitch decks and how to create one, check out our guides:

What Is a Pitch Deck? A Beginner's Guide to Greatness

What to Include in a Pitch Deck (Slides 99% of Investors Want)

Create a Winning Pitch Deck Investors Love (Examples & Tips)

2. Sales deck presentations

Sales deck presentations are aimed at convincing prospects to buy your product or service. They highlight the unique selling points and benefits of your offering, and explain why you’re the perfect solution provider for your prospects’ specific pain points.

Here’s an example of a sales deck presentation:

Orbiit - Visually narrated sales deck

Visually narrated sales deck of a virtual networking platform telling AND showing readers what's in it for them.

To find out more, read our article on how to make a sales pitch deck that turns ‘Maybe’ to ‘Yes!’ .

3. Product marketing presentations

Product marketing presentations are used in the awareness stage to introduce a new product or feature to the market. They focus on the benefits of the product and how it meets the needs of the target audience.

Here’s an example of a product marketing presentation:

Mayku - Physical product deck

A welcoming physical product deck for immersive introduction to a revolutionary vacuum-forming solution.

4. White papers

A white paper is an in-depth analysis of a problem and its solution. It's a way to establish your expertise and thought leadership in a particular area. White papers are often used in the consideration stage of the funnel to educate potential customers about a complex issue related to your industry or product.

Here’s an example of a white paper:

Drive - Automotive research white-paper

A white-paper showing high-level research on electric vehicle charging wrapped in a stunning interactive experience.

5. Case studies

Case studies showcase a customer success story or outcome. They provide real-world examples of how your product or service has helped a customer, making them a powerful tool for building trust and credibility.

Here’s an example of a case study:

Boom25 - Interactive case study deck

Fun, engaging, and interactive case study of a UK cashback service: mixing business with entertainment.

If you want to learn more, check out our guides:

What Is a Case Study & Customer Success Story?

5 Steps for Writing a Case Study for Business (+Templates)

12 Steps to Create a Business Case Study That Converts

Case Study Format Types: Match Format with Business Goals

6. Report presentations

Report presentations are used to share data-driven insights and findings in the consideration stage. They make complex data accessible and engaging, helping your audience understand and remember the information.

Here’s an example of a report presentation:

Meta - Interactive corporate report

Insights and trends from Israel's thriving consumer-facing industry. A comprehensive review of the B2C ecosystem's performance and future prospects.

7. One-pagers

A one-pager is a brief, informative overview of your solution sent to potential customers in the awareness stage. It's a quick way to communicate the key features and benefits of your product or service, meant to pique the prospects’ curiosity enough to move them down the sales funnel.

Here’s an example of a one-pager presentation:

Octopai - Outbound sales one-pager

An outbound one-pager identifying a problem in modern-day analytics and offering an easy-to-grasp solution.

To find out more about one-pagers, read these guides:

What Is a One-Pager: Types, Benefits & Main Use Cases

Make One-Pagers That Grab Attention, Engage & Convert

Create a Sales One-Pager (Examples, Writing Tips, Templates)

Create a Business Plan One-Pager (+ Proven Templates)

How to Create a Startup One-Pager That Wows Investors

How to Create a Product One-Pager (That Gets People Excited)

8. Education and academic presentations

Education and academic presentations are used for teaching or presenting research findings. They are designed to simplify complex concepts and foster deep understanding.

Here’s an example of an academic presentation:

Research proposal

This school research presentation template is perfect for students who need to present their findings from a research project. The template includes space for a title, introduction, main body, conclusion, and bibliography.

If you need more guidance, we have a blog post on how to write a research proposal , including tips and templates.

9. Business proposal presentations

Business proposal presentations are used to close deals at the end of a sales cycle. They summarize your offering and why it's the best choice for the prospect.

Here’s an example of a business proposal presentation:

RFKeeper - Retail proposal deck

A dynamic, highly visual proposal deck for a retail software provider, designed to grab and keep attention.

For tips on how to create your own, check out our posts:

How to Write a Business Proposal (Examples & Templates)

Make a Winning Business Proposal Presentation in 12 Steps

10. Sports sponsorship proposals

Sports sponsorship proposals are used to secure funding and support for a sports team. They highlight the benefits that the sponsor will receive in return for their investment.

Here’s an example of a sports sponsorship proposal presentation:

Football sponsorship proposal

This bright and energetic template reflects the dynamic nature of sports. With a combination of text-based and interactive slides, you'll easily convey the history of your organization, as well as the team's main drivers and objectives, to make sponsors instantly realize the value for their money.

11. Business plan presentations

Business plan presentations detail a company's strategy and objectives. They are often used to secure funding from investors or to align team members around a common vision and plan.

Here’s an example of a business plan presentation:

General Business Plan

This template has everything you need to create a visual summary of your business idea. Thanks to a range of interactive slides, you'll be able to convey your vision in a way that impresses investors and gets you the necessary buy-in.

If you want to see real-life examples of each presentation type, check out our master post containing 52 perfect presentation examples to set you apart .

What are the main types of presentation use cases?

Presentations are a versatile tool that can be used in a variety of scenarios, both within and outside an organization. Here are some of the key use cases for presentations:

External use cases

Sales: Persuading potential customers to purchase your product or service through compelling storytelling and showcasing benefits.

Funding : Convincing investors to provide capital for your business by demonstrating potential for growth and profitability.

Thought leadership: Establishing your expertise and authority in a specific field by sharing unique insights and perspectives.

Investor relations: Communicating important company information to investors to maintain trust and transparency.

Donor communication: Engaging and updating donors on the impact of their contributions to maintain their support and involvement.

Conference or event presentations: Sharing insights or research findings at a public event to engage the audience and build your reputation.

Partnership presentations: Proposing a collaboration or partnership to another business by highlighting mutual benefits.

Product launch presentations: Introducing a new product to the market with a compelling narrative that highlights its unique features.

Client presentations: Updating clients on progress or delivering project results to maintain their satisfaction and trust.

Training and education presentations: Teaching a new skill or concept to an external audience to enhance their knowledge and skills.

Public relations presentations: Managing the public image of your company by addressing public concerns and highlighting positive actions.

Government or regulatory presentations: Communicating with government agencies or regulatory bodies to ensure compliance and maintain good relations.

Social responsibility presentations: Showcasing your company's efforts to give back to the community to enhance your company's reputation and public image.

Internal use cases

Team meetings: Discussing project updates or new initiatives with your team to ensure everyone is aligned and informed.

Training and onboarding: Introducing new employees to company policies and procedures through employee onboarding software to ensure they are well-equipped to perform their roles.

Strategic planning: Outlining your company's strategic goals and plans to ensure all employees are working toward the same objectives.

Performance reviews: Providing feedback on an employee's performance to help them improve and grow in their role.

Internal reporting: Sharing company performance data with internal stakeholders to keep them informed and make data-driven decisions.

Town hall meetings: Addressing the entire company on key updates or changes to ensure transparency and maintain employee trust.

Change management: Guiding employees through a period of significant change to ensure smooth transition and maintain morale.

Employee engagement and recognition: Celebrating employee achievements and fostering a positive company culture to boost morale and productivity.

Training workshops and seminars: Providing in-depth training on specific topics to employees to enhance their skills and knowledge.

Internal marketing and branding: Promoting company values and culture to employees to foster a sense of belonging and commitment.

How do I choose the right type of presentation for my business?

Choosing the right type of presentation for your business is like picking the right tool for a job. It's all about understanding your needs and resources.

Here's a simple guide to help you make the right choice:

1) Presentation objectives

Start by defining what you want to achieve. Are you aiming to educate, persuade, or inspire? Your objective will shape the type of presentation you need. For instance, if you're looking to secure funding, a compelling pitch deck is your ticket.

2) Target audience

Your audience is your compass. Their needs and expectations will guide your presentation's content and style. For example, a sales deck might resonate with potential customers, while a thought leadership white paper could be more suitable for industry peers.

3) The message

What key message do you want to convey? Ensure your presentation type allows for this message to be communicated effectively. For example, if you're eager to share your company's green thumb, a social responsibility white paper can beautifully showcase your eco-friendly initiatives and their positive effects.

4) Resources

Finally, always take stock of your resources. Time constraints and available data can influence your choice. A one-pager could be more practical than an extensive sales deck when you’re short on time or manpower.

What are the best types of tools to create and improve my presentation?

Creating a compelling presentation is not just about the content, but also about the delivery.

Here are some tools that can help you elevate your presentation game:

Storydoc: This tool allows you to transform static slides into highly-engaging and converting interactive web presentations. It's perfect for creating memorable narratives that captivate your audience from start to finish and gets them to take action.

Think-Cell: If your presentation involves data, Think-Cell is a must-have. It simplifies the creation of complex charts and enhances data visualization, making your insights more digestible and impactful.

VideoScribe: Want to add a touch of animation to your presentation? VideoScribe allows you to create high-quality whiteboard-style animation videos, adding a dynamic element to your content.

Mentimeter: This gamified presentation software allows you to engage your audience with live polls, quizzes, and Q&A sessions, making your presentation a two-way conversation.

Pitcherific: Pitcherific helps you create and practice your pitch speech, making it a great tool for preparing investor presentations.

Create your presentation from a template

Your digital presentation is your passport to powerful communication. Why settle for static, lifeless slides when you can turn your presentation into a dynamic, interactive adventure?

Think of your key messages as stepping stones on an exciting journey, one that keeps your audience engaged from the opening slide to the grand finale. Interactive presentation templates are the perfect vehicle for this journey.

Each template is a canvas waiting for your unique touch.

Grab a template and use it to create your best presentation yet.

Hi, I'm Dominika, Content Specialist at Storydoc. As a creative professional with experience in fashion, I'm here to show you how to amplify your brand message through the power of storytelling and eye-catching visuals.

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