The three main forms of business organizations are partnership, corporation and sole proprietorship and new businesses are usually formed as sole proprietorships due to lowest cost of creating this form of business but can only be applied where there is a single owner.
The peanut butter sandwich shop should be a partnership firm with all five students acting as partners. The partnership form of organization is recommended due to lower startup costs, investment sharing by partners and low taxes. The partnership business could later evolve into a corporation if earnings of the business display stable growth in the future. The partnership can be formed with either all partners investing and working in the firm or some partners investing in the firm while others work for the firm (Steingold, 2008).
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