Both a partnership and a corporation operate with the aim of maximizing profits. This is the only a corporation can maximize the wealth of the shareholders. These two forms of business have similarities and differences in the process of maximizing profits. This research paper will analyze the similarities and differences between partnerships and corporations in the area of maximizing profits.
Both types of businesses need to reduce costs in order to maximize profits. The profits are the excesses of revenues over the costs. Higher costs reduce the profits of both organizations. As a result, both organizations aim at minimizing the costs of production so as earn more profits. Low costs can be achieved by ensuring cheap raw materials, low transport costs and the avoidance of unnecessary expenses (Sivagnanam, 2010).
Partnerships and corporations require maximizing revenue so as to reap more profits. As seem above, when the revenues are more than costs, the profits are higher. Both firms therefore aim at increasing revenues to maxims profits. This can be achieved by methods such as advertising for the organizations products and producing goods and services that meet the needs of the customers (Sivagnanam, 2010).
Both types of business require proper management to ensure that the targets of the organization are achieved. Decision making in the organization is made by this management and the implementation process towards achieving huge profits is facilitated by the management.
There are differences between partnerships and corporations in the maximization of profits. First, corporations require at least two directors to manage the activities of the business. On the other hand, the management of a partnership can be by one person. This is due to the difference in size of the two organizations.
The other difference is that the management of a partnership is on the hands of the partners unless the partnership has grown large or the owners are not available. However, the owners are responsible for the activities of the partnership (Sivagnanam, 2010). On the other hand, the management of the corporations is under the hands of directors who are appointed by the shareholders. The owners have no direct control over the management of the business hence cannot influence the profit making processes.
The corporations can only carry out the activities that its memorandum of association allows it to carry out in the process of maximizing profits. Carrying out any other activity is illegal. On the other hand, the partnership can carry out any activity that can generate profits (Sivagnanam, 2010).
In conclusion, it can be observed that all the businesses aim at maximizing the wealth of the owners. Even though there are differences in the two types of businesses, there are some similarities of both in the area of maximization of profits.
Sivagnanam, K. J., & Srinivasan, R. (2010). Business economics. New Delhi: Tata McGraw Hill.