There are various types of businesses. These types vary based on who owns the business, what the business does in the market and how it operates. The current business environment is dominated by a lot of business entities and ventures.
1) Sole proprietorship
A sole proprietorship is a business that is formed and operated by one person. This type of business is the easiest to form; a reason why it takes up 74 percent of businesses in the USA alone.
The owner also makes all decisions, enjoys profits alone, takes pride in ownership, pays fewer taxes compared to Limited Liability Companies (LLCs), needs very little capital to start off and can use his/her assets to support the business operations.
On the other hand, borrowing personal assets for this type of business places the owner at risk since the business has no limited Liability. The life of the business also ends when the owner dies or quits. Consequently, capital may be difficult to raise by one person. Again, the owner suffers losses alone.
A sole proprietorship is viewed as an informal type of business, this makes it difficult to win contracts or participate in ‘formal’ activities for ‘formal’ businesses.
Unlike sole trading, a partnership is owned and operated with a minimum of two and a maximum of 20 members. It is also easy to form and operate so long as the agreements are spelled out in a good time. Again, it does not have any legal provisions to fulfill before set up and capital is easily raised from partners.
The combination of partners’ know-how and skills ensures that good decisions are debated and the best chosen for the implementation of partnership policies and practices.
This is a big business owned by shareholders or investors. Its Initial capital is easy to raise as shares with par value are floated on the stock exchange for the public to purchase. This type of business has Limited Liabilities i.e. unless the corporate veil is pierced, shareholders’ assets can never be claimed by creditors.
With different people pooling resources to become shareholders, the life of a corporation is unlimited. In most cases, professionals are hired to manage or run the business and risks are shared by all parties of interest.
4) Multi-national corporations (MNCs)
These are global or international businesses that manufacture and sell products in different countries.MNCs are large and all their worldwide operations centrally controlled.
With big investments in foreign countries, Multi-national corporations import goods and services, allow local producers in a foreign country to manufacture their products and have assembly operations and manufacturing plants in foreign countries.
Examples of These Corporations include Coca-Cola, Nike, AOL, Honda, Toshiba et cetera. They are known to create goods and services and job opportunities that would otherwise not be available in the countries in which they operate.
5) Not for profit organizations
Not-for-profit organizations are also referred to as nonbusiness entities. They are formed by people with a common interest and are not profit-oriented. Most of them pursue a social cause that is beneficial to society.
Not for profit organizations operate under a ‘nondistribution constant’ i.e. surplus revenue is used to meet objectives, goals, and mission instead of it being distributed as dividends to shareholders. To avoid taxation, the non-profit organization should have charitable status or apply for tax exemption.
Examples include the Red Cross, UNICEF, communal learning institution and food banks among others. Most of them apply for funding from donors to manage their projects.