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Three Types of Businesses

Every business requires some form of investment and enough customers to whom its output can be sold on a consistent basis in order to make a profit. Business is important to a country’s economy because businesses provide both goods and services and jobs. and there are many Types of Businesses we will discuss three of them here.

Types of Businesses

Sole Proprietorship

the first Types of Businesses, it is a type of enterprise that is owned and run by one person and in which there is no legal distinction between the owner and the business entity. Many sole proprietors do business under their own names because creating a separate business or trade name isn’t necessary. Advantages of Sole Proprietorship 

  • Personal liability of owner.
  •  The proprietor has unlimited personal liability for the obligations of the business.
  • Tax treatment.
  • The business entity is not taxed, as the profits and losses are passed through to the sole proprietor.

Disadvantages of Sole Proprietorship 

  •  Unlimited liability.

Partnership

A legal form of business operation between two or more individuals who share management and profits. there are three most common types of partnerships. 

  • General Partnership.
  • Limited Partnership. 
  • Limited Liability Partnership.

Advantages of Partnership 

  • two heads are better than one.
  • your business is easy to establish and start-up costs are low.
  • more capital is available for the business.
  • you’ll have greater borrowing capacity.
  • high-caliber employees can be made partners.
  • there is an opportunity for income splitting.
  • partners’ business affairs are private.
  • there is limited external regulation.
  • it’s easy to change your legal structure later if circumstances change.

Disadvantages of Partnership 

  • the liability of the partners for the debts of the business is unlimited.
  • each partner is liable for the partnership’s debts.
  • there is a risk of disagreements and friction among partners and management.
  • each partner is an agent of the partnership and is liable for actions by other partners.
  • if partners join or leave, you will probably have to value all the partnership assets and this can be costly.

Private Corporation 

is any corporation owned by individuals or companies as opposed to a government entity. All of a corporation’s rights must be exercised by a company representative, but the representative cannot be held personally responsible for actions undertaken on behalf of the corporation in most instances.  Advantages of Private Corporation 

  • liability for shareholders is limited.
  • it’s easy to transfer ownership by selling shares to another party.
  • shareholders can be employed by the company.
  • the company can trade anywhere.
  • taxation rates can be more favorable.

Disadvantages of Private Corporation 

  • Restricted Access to Capital Markets.
  • Increased Legal Compliance. 
  • Higher Administration Costs. 
  • Limited Personal Control.
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