If you haven’t already started your company, chances are that you’re doing some research. Your Research may Intel on business types, financial logistics, and legal distinctions related to the opening of your company. If you intend to go into business by yourself, with partners, or as part of a corporation. Then there are some things to be aware of when starting your business.
There are few major business types that we will discuss here, and a fourth distinction among the three.
A service business sells a product with no physical form. Instead sells intangible product. A few times of service business are a law firm or consulting business. Their “product” is not something one can touch, but rather exists in the form of advice, representation, specialty skills, or expertise on a particular subject.
A merchandise business buys and sells products as they are, without altering the form of the product. Typically, a business will purchase products at a wholesale price from any distributors. The business will add a mark up amount to the product to sell. Most of the time, the products mark up will have a price that matches the market value. Merchandise businesses make a profit by selling products at a higher cost than they paid for those products. An example of a merchandise business would be grocery stores, convenience stores, retail re-sellers, and other distributors.
A manufacturing business buys materials to alter and turn into something new. It combines raw materials into new products to sell to consumers and clients. This might be a boutiques or other shops that create their own products, jewelry makers, clothing designers, and other finished-product-producing businesses.
A hybrid business may combine two, or all three of the major types of businesses as part of its operations. These businesses could be something like a restaurant. Which combines food with dining in services in its business operations. Other businesses might combine merchandise and manufacturing by selling products in their original form and products that the business has created from raw materials. In classification, a hybrid business will be classified as its main business type.
In every business, there must be an owner. Each business is classified by the business entity, whether there is one only owner or many owners. This is separate from the business type. Below is the definition each type of organization. It is crucial to understand your ownership and leadership type to be successful in your business.
Most small businesses operate under a sole proprietor. Which is a single person that owns and operates the business. Many owner choose sole proprietorship when start out because it is easier to set up. This type entity has a low associated cost. Unfortunately, this type of entity does not protect any personal assets along with business assets.
A business run by a partnership has two or more owners who contribute resources into the company. All owners of the business share the profits the company makes. Businesses that start with a shared idea or vision are often under a partnership ownership. In a general partnership, all partners have unlimited liability. Creditors will try to pursue any personal assets to get paid. Thankfully, all owners in a partnership are protected from this. As long as, any unpaid bill are unrelated to the business.
Multiple people are owners to one business with a corporation. This maybe under stocks and a shares system. The person with the most amount of shares in the company is the person who owns most of the company. Owners and stockholders do exists as a separate legal entity from the company. Creditors cannot pursue their personal assets. Most Corporations have a board of directors that help make decisions for and about the company. A board of directors help to control the company’s activity, however, they also help to protect the corporation.
LLC’s are a hybrid ownership type that combine aspects of both a partnership and a corporation. An LLC is not actually an incorporated business. Therefore, an LLC is not considered to be part of a corporation. However, the Owners of an LLC still get enjoy all the limited liability benefits. Thankfully, any individuals in an LLC will not be personally pursued by any creditors. An LLC has a choice to be taxed as a sole proprietorship, a partnership, or a corporation.
A business that is owned but, also, operated by a group of individuals for mutual benefit is know as cooperative. A known nick name for the entity is “co-op”. When you work in a co-op all individuals are known as “members”. A good example of a co-op could be a credit union, housing cooperative, or even co-op grocery store.
Becoming familiar with business terms and concepts is a necessary building block to beginning or continuing one’s own business. Certainly, you don’t have to navigate this complicated process alone! We are ready and willing to help with your needs. Whether you’re a sole proprietor, part of a partnership, or looking into larger corporate systems. We can advise you and help your path remain as smooth as possible. We can’t wait to bolster your business in any way we can.
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