3. Managerial Needs : Managerial and administrative requirements also affect the decision about
form of organisation. When the concern is small and it caters to local needs only then one person
will be enough to manage the business. Sole - proprietorship form of organisation will be suitable
for such a business. If business caters to more areas, then more persons will be needed to look
after various business functions. When a business is run on a large - scale basis, it will require the
services of specialists to manage various departments. The company form of organisation will be
suitable for such concerns.
4. Tax Liability : A joint stock company has more tax liability as compared to a sole - trade
business and a partnership firm. A company faces double taxation liability. A company is taxed
as an individual first and the profit distributed to shareholders are again liable for tax as income of
the recipients. A partnership concern and a sole-trade business are not separately taxed. A small-
scale concern will be able to avoid higher tax liability.
5. Continuity : This is another factor influencing a decision about the form of ownership. If the
concern is stable and there is no fear of discontinuity it will attract more investment. The trained
and qualified persons will like to join the concern. The only company form of organisation is the
only form which ensure stability and continuity.
6. Capital Requirement : The need for capital will depend upon the nature of business and scale
of operators. A manufacturing concern may require more capital or compared to a retai shop . On
the other hand, if scale of operations is large then, capital requirements will also be more. After
determining the capital needs the form of organisation should be selected.
7.Flexibility : A good form of organisation should also provide for flexibility in its operations.
