What Are Different Kinds Of Business – There are different types of businesses. These types are based on the ownership of the business, what the business does in the market and how it operates. The current business environment is dominated by many business organizations and enterprises.
A sole proprietorship is a company founded and managed by one person. This type of business form is easy to form; In the United States alone, it accounts for 74 percent of businesses.
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The owner also makes all the decisions, enjoys exclusive profits, has pride of ownership, pays lower taxes than limited liability companies (LLCs), requires much less startup capital, and can use their assets to support the business.
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On the other hand, lending personal property for this type of business puts the owner at risk because the company does not have limited liability. The life of a business also ends when the owner dies or leaves. As a result, it can be difficult for an individual to raise capital. Again, the owner bears the loss.
Sole proprietorship is considered an informal type of business, making it difficult for ‘formal’ companies to obtain contracts or participate in ‘formal’ activities.
Unlike a sole proprietorship, a partnership is owned and operated by a minimum of two and a maximum of 20 members. It is also easy to create and manage as long as contracts are listed on time. Again, there are no legal requirements to be met before incorporation, and capital can be easily raised from partners.
The combination of partner knowledge and skills ensures good decision-making for discussion and implementation of partnership policies and practices.
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Disadvantages of this type of business include; Profit sharing between partners, disagreements between partners and limited business life.
It is a large company owned by shareholders or investors. Its initial capital is easy to raise because the par value shares are sold on the stock exchange for public purchase. This type of business has limited liabilities, i.e. unless the corporate veil is pierced, creditors can never claim the assets of the shareholders.
With different people pooling resources to become shareholders, the life of a corporation is unlimited. In most cases, experts are hired to manage or run the business, and the risks are shared by all interested parties
This type of business is difficult to start given the legal conditions that must be met before establishment, decisions are made by majority and are subject to double taxation. i.e. personal tax and profit tax
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These are global or international companies that manufacture and sell products in different countries. Multinational companies are large and all their global operations are centrally controlled.
With large investments in foreign countries, multinational corporations import goods and services, enable local manufacturers to manufacture their products in foreign countries, and have assembly operations and manufacturing facilities in foreign countries.
They are known to create goods and services and employment opportunities that would otherwise not be available in the countries where they operate.
Non-profit organizations are also known as non-commercial organizations. They were founded by people with common interests and are not for profit. Most of them pursue a social goal that benefits society.
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Non-profit organizations operate under a ‘non-distribution constant’, i.e. excess income is used to achieve objectives, rather than being distributed to shareholders as a dividend. In order to avoid taxes, a non-profit organization must have charitable status or apply for tax exemption.
Franchises are businesses bought by individuals with a percentage of the profits going back to the parent company. Franchisees must strictly adhere to the guidelines set by the parent corporation.
Many entrepreneurs have succeeded in franchising because it is a good way to expand their business without the risk of debt; This is because the business essentially grows from the resources of the other party. Again, franchises guarantee rapid growth so there is no need to worry about competition.
Since the franchisee has a stake in the business, it will ensure dedicated management and operational quality so there is no need to spend resources on manager training and recruitment.
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A limited liability company (doo) is founded by at least one person with a written contract. The contract includes company details and various provisions; Issues related to management, distribution of profits and losses and how interests are allocated to others.
The articles of association are another important document that should be drafted when forming an LLC and should be supported by industry-relevant certifications. LLCs raise capital by issuing shares to the public and spread risk by issuing shares.
It is an incorporated type of business run and managed by trustees for the beneficiary. The person giving the trust is called A
Profits derived from investments or accumulated losses are shared equally by the beneficiaries in the trust according to their interests.
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This type of business allows more than one party to operate the same business under different identities with respect to assets or liabilities. Tenants share equal business rights and each of them can transfer business rights to any user.
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In this type of business, one person owns and operates the company and does not need to register their name with the company. A common misconception about this type of business is that it is only about the owner’s personal claim to income or property; However, if other employees are involved in this type of business, they will also be considered part of the sole proprietorship.
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One of the advantages of running a business as a sole proprietor is that it takes less time and is more flexible, especially if the business owner has no employees. Another advantage of this type of business is that personal assets are protected from liability to the company.
With this in mind, it is important to note that when there is a sole proprietorship, the business owner does not have limited liability. This means that if the business goes into debt due to unpaid taxes or large expenses, the individual may be forced to pay all of those debts with their personal assets if the business fails.
Finally, self-employment does not require company registration and is not legally recognized as an official company. However, it is still strongly recommended to enter into a DBA (Business As) agreement between the company and the system administrator for sole proprietorships that may arise later.
A limited liability company (LLC) is a type of business structure derived from the Uniform Limited Liability Company Act (Amendments of 1996 and 2006), which has been adopted in some form by all US states, the District of Columbia and US Virgin Islands. .
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LLCs are subject to fewer regulations than traditional businesses; This means they can be used to set up companies with more flexibility and fewer regulations.
The minimum capital required to form an LLC is equal to the minimum required by state law to form a business entity, although most states that have adopted LLC laws require at least $1,000. Forming an LLC requires the filing of Articles of Incorporation. , moving requirements vary widely from one state to another. Some of the members require the submission of an annual report; Others don’t. In addition, some types of businesses are exempt from some or all of the ongoing formalities and do not need to file any documents after incorporation (eg, single member LLCs, which typically involve rental properties).
LLCs can be classified into four types: single-member limited liability company (SMLLC), multi-member LLC, manager-managed LLC, and member-managed LLC.
SMLLC is a single owner LLC with liability protection. This means that the only money that can be extracted from the company is through dividends that have already been paid to the owner as compensation for his/her stake in the business. The income left over after daily needs are met is called “profit”, but the profit cannot be taken out of the SMLLC immediately. Instead, it’s called a capital account, which goes into funds set aside for future distributions.
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The law does not allow mutual business between members (for example, an LLC owner cannot lend money to himself). However, if there is any other type of transaction between the owner and the company, such as a personal guarantee or a lease from a member to a limited liability company, then the self-dealing tax rules will apply.
A manager-managed LLC (also called a member-managed limited liability company) is one
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