Let’s find business types and their forms to start a business.
What is Business?
A Business defines as an organization or enterprise entity engaged in commercial, industrial and professional activities. Generally, a business starts with a concept (an idea!) Business enterprise uses economic resources to provide products or services to the consumer in exchange for money or real values.
There are three major types of business.
1. Service Business
A service business provides only services like Professional skills, Advice, Expertise etc. As a service, you provide some values in the form of services.
For example- Banking services, Schools, Accounting firms, Law firms, Salons & Repairing shops.
2. Merchandising Business
A merchandising business provides/Deals with products only. It means “Buying & Selling Products” in wholesale/retails prices. They make profits through buy & sell products at a higher price than the purchase cost. The merchant sells products without changing their form. It’s the most popular business type where so many people are doing.
For example- Grocery store, Textile business, Mobile shop, Distributorship & there sellers.
3. Manufacturing Business
A manufacturing business means you understand reading the headline. Ok, Let me tell you, Here you buy raw materials/products to make new fresh useful products & selling to wholesalers or retailers.
For example- Purchase plastic as raw material for making water bags & other related products.
The 5 Most Popular Forms of Business Organizations.
1. Sole Proprietorship
Single proprietorship means, Its owned & Operated by a single person. Most common & simple type of business which is preferred by most of the peoples. If you’re operating one-person business then you’re automatically considered a sole proprietor as per the government. However, depending on your products and location, you need to register for local business permits along with your city/state. The owner of business faces unlimited liability: Means, the creditors of the business may go for the personal assets of the proprietor if the business cannot pay them.
A business owned by two or more people who share equal responsibilities that mean partnership. There have two main types of doing business in partnership.
- General partnership: Here, All partners have unlimited liability. The general partner is usually involved in the everyday business decisions and has personal liability for the business setup.
- Limited Partnership: Limited partner (an investor) who is not liable for debts and doesn’t participate in regular business management of the company. Just like a general partnership, if you enter a limited partnership, you’ll need to register your business with the state, set up a business name, and inform to Internal Revenue Service (IRS) of your new business model. This option also most common for those who looking for investment, so keep that in mind when exploring your partnership options.
A corporation is a business organization that has a separate legal entity from its owners. Ownership in a stock corporation is represented by the sharing of stocks. It’s the type of fully independent business with shareholders. A corporation is more complicated to create as compared to given sole proprietorship & partnership.
4. Limited Liability Company
An LLC is a combine of a partnership and a corporation. A newer type of business. Instead of shareholders, Limited liability company owners are mentions as members. It does not matter how members are in particular LLC has. There have to be managing members who take care of the daily business operation & management.
A cooperative is a business organization owned by a group of individuals & it is operated for their mutual benefit whatever is earned by the cooperative is the shared among the members themselves and it’s not required to pay out any other external stakeholders. A cooperative differs from cooperation. In that members are not shareholders.
For example- Water & electricity (Utility), Cooperative banks, Credit unions, and housing cooperatives.