Common Types of Business
What is business? A business is simply defined as a legally registered entity or a partnership organized for carrying out commercial, professional, or agricultural activities. Also, a business is also known as the collective efforts of many people to make and sell products and services to earn income and profit.
There are many kinds of businesses but the most common ones are those of enterprises. These are corporations, partnerships, joint ventures, proprietor/shareholder, and sole proprietorships. Each has different purposes and ways to carry out their activities, strategies, and limitations. For instance, a partnership is a legal entity whereby two or more people join together to work on projects or share risks. However, there is only limited partnership relationship between the partners. The venture may be carried out in many ways like by buying lands, building structures, equipping boats, etc.
A joint venture, on the other hand, is when two or more people come together and decide to make a business deal. This means that they are legally joining forces as one ventures and forming a new legal entity. For instance, a partnership can end up into a liability partnership or a general partnership depending upon the agreement. In a liability partnership, one partner contributes his/her earnings or profits to another partner. In a general partnership, one partner contributes his/her income to all the other partners. As you can notice, a liability partnership or general partnership does not create a separate legal entity and it is dependent on the partners’ agreement and liability clause.
On the other hand, there are also a few common types of businesses that are commonly known as sole proprietorships, partnership, and shareholder/asset-based common types of business structures. A sole proprietorship is a legal entity where the owners control the whole business operation. Here, the business and the owners are separated. One can only become the sole owner through the inheritance method or by purchase and sale. One can’t become the leader of the company but he/she can still manage the company.
A partnership on the other hand is created when two or more people join as one partnership in order to engage in business together. In a co-op, the business type is determined by the composition of the members. There are some common types of business co-ops that exist today. A cooperative benefit society is one example of a co-op where the members have a shared ownership in the business. A landlord/shareholder type can be created in a cooperative business where the landlord controls the assets of the cooperative and manages the funds.
Lastly, there are also some common types of corporations. A C corporation is a legal entity that has limited liability. It has only one class of shareholders i.e. the members of the corporation. A partnership system is another example where the partnership shares the assets of the partners. And last but not least, an S-corp is a corporation with one class of shareholders i.e. the shareholders of the parent company.