Explain briefly factors to be considered …

It is evident that each form has certain advantages as well as disadvantages. Therefore, it is important to choose an appropriate form of organisation.
Factors that determine the choice of form of
organisation:

1. Cost and ease in setting up the organisation: From the’point of view of initial cost, sole proprietorship is the preferred form as it involves least expenditure.
   A company form of organisation, on the other hand, is more complex and involves greater costs.
2. Liability : In case of sole proprietorship and
   partnership firms, the liability of the owners/ partners is unlimited. In Joint Hindu Family Business, only the Karta has unlimited liability. In cooperative societies and companies, however, liability is limited.
3. Continuity: In case the business needs a permanent
   structure, company form is more suitable. For short term ventures, proprietorship or partnership may be preferred.
4. Management ability : A sole proprietor
   may find it difficult to have expertise in all functional areas of management. In other forms of organisations like partnership and company, there is no such problem.
5. Capital consideration : Companies are in a better
   position to collect large amount of capital by issuing shares to a large number of investors. Partnership firms also have the advantage of combined
   resources of all partners. But the resources of a sole proprietor are limited.
6. Degree of control: If direct control over operations
   and absolute decision making power is required, sole proprietorship may be preferred.