There are many types of Businesses. business can be organized in one of several ways, and the form its owners choose will affect the company’s and owners’ legal liability and income tax treatment. Here are the most common options and their major defining characteristics.
Types of Businesses
Service Business A service type of business provides intangible products. Service type firms offer professional skills, expertise, advice, and other similar products.
Merchandising Business is one of the most common types of businesses we interact with daily. It is a business that purchases finished products and resells them to consumers. Think of the last time you went shopping for food, household items, or personal supplies. A merchandising business sells a product without changing its form.
Manufacturing Business combines raw materials, labor, and factory overhead in its production process. The manufactured goods will then be sold to customers. a manufacturing business buys products with the intention of using them as materials in making a new product. Thus, there is a transformation of the products purchased.
Hybrid Business Traditional business firm that combines an internet front-end with its brick and mortar back-ends, such as warehouses and order fulfillment services. are companies that may be classified in more than one type of business. A restaurant, for example, combines ingredients in making a fine meal, sells a cold bottle of wine, and fills customer orders.
Forms of Business Organizations
Sole Proprietorship individual entrepreneurship or proprietorship 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. The owner faces unlimited liability; meaning, the creditors of the business may go after the personal assets of the owner if the business cannot pay them.
Partnership is a formal arrangement in which two or more parties cooperate to manage and operate a business. Various partnership arrangements are possible in which all partners might share liabilities and profits equally or some partners may have limited liability.
Corporation is a legal entity that is separate and distinct from its owners. Corporations enjoy most of the rights and responsibilities that an individual possesses enter contracts, loan and borrow money, sue and are sued, hire employees, own assets and pay taxes.
Limited Liability Company is hybrid forms of business that have characteristics of both a corporation and a partnership. An LLC is not incorporated; hence, it is not considered a corporation. the owners enjoy limited liability like in a corporation. An LLC may elect to be taxed as a sole proprietorship, a partnership, or a corporation.
Cooperative is a business organization owned by a group of individuals and is operated for their mutual benefit. The persons making up the group are called members. Cooperatives may be incorporated or unincorporated.