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The stakeholder approach emphasizes on responsibility over profitability as the major goal of a
firm. The stakeholder approach views firms as organizations primarily created to serve all the
parties involved and hence the responsibility perspective. On the other hand, the shareholder
approach emphasizes on profitability over responsibility as the primary goal of a firm. Therefore,
the shareholder approach views organizations as instruments of the owners and organizational
performance should be measured in terms of profitability and organizations therefore should
strive to maximize the value of wealth of the shareholders.
The three main organizational forms of forming a business include partnership, corporation and sole
proprietorship. The sole proprietorship is a business organization whereby one person (who is the owner
of the business) starts and runs the business. Ideally, in this type of business organization, the owner and
the business are one and the same. The owner is entitled to all the profits and liabilities of the business. A
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