What are the purposes of a formal organisation structure?

Question

is about business and accounting environment (organisation)

Answer 1

The foremost objective is to give the structure a legal entity status such as company form of organisation, a partnership, LLP, proprietary, AoA, Trust, etc.

Secondly, It helps within the organisation and outside to the rest of the world the functioning criteria of the organisation. Like Companies are run by the Board of Directors channelised by CEO/MD and so on. Partnerships need to have atleast two persons whereas a Proprietary compulsorily be a single owner.

The tax treatment on the income/profits of the organisations differ and hence it becomes a significant for the promoter/entrepreneur to decide which form of organisation suits him/her the best.

The invitation and participation of public/shareholders depends on the form of structure of the organisation. A public limited can always have any number of shareholders (depending upon its authorised capital) whereas partnership and proprietary can't have this facility.

For accounting purpose, statutory norms for company form, partnership, proprietary, trust are all different from one another and so are the audit requirements, declaration of quarterly results, public announcements etc.

Commercially, the size and scale of business matters so is the formal organisational structure to tackle volume, divisions, cross border businesses....

In fact, this list of purposes could be quite lengthy for small or big considerations of business, legal requirements, taxation, preferences, funding and other issues.