Question

5. Briefly describe the four types of business structures that can be used to organize agribusinesses and farms. List the similarities and differ ences of the structures.

Answer 1

The four types of business structures that can be used to organise agribusiness or farms are as follows:

1) Sole proprietorship: In this business structure, the business is owned by an individual or a couple and they have the entire stake in the company as well as the tax burden. This method is suitable for farmers/ entrepreneurs with large farms and agribusiness factories.

2) Partnership: In this structure, the business is jointly owned by two or more parties who share costs of capital and labour used in the agribusiness and at the same time share the profits and losses. Like sole proprietors, partners are also owners (and not workers) in the farm and are supposed to pay taxes themselves. This is suitable for entities that can mutually benefit each other.

3) Corporation: A corporation is formed according to the rules of the state wherein the taxes are to paid according to the rules of the state while the profits are to be distributed to the shareholders who invested in the agribusiness corporation. Unlike the proprietorship and partnership, a corporation is run by an entity which manages the corporation and pays taxes while the shareholders do not pay taxes but have a stake in the company. This structure is usually suitable for agribusiness companies and farms.

4) Limited liability company: Similar to a corporation, the owners of the firms gave limited liabilities towards debts and actions of the LCC. They also provide some sharing  in terms of tax payments and managerial responsibility. This is a new trend followed by a few agribusiness companies.