Starting and Running a Business/Kinds of Business

Business Structures

There are several different business structures such as: sole proprietorship, partnership, LLC, and corporation. Each structure has its own advantages and disadvantages, so it is important to choose the one that is right for your business. Depending on your business structure, you'll need to register your business with the state or federal government before. Most businesses need to get a tax ID number and obtain certain licenses and permits.

Sole Proprietorship

A business owned by one person. The owner may operate on their own or may employ others. The owner of the business has total and unlimited personal liability of the debts incurred by the business. Sole proprietorships can be a good choice for low-risk businesses and owners who want to test their business idea before forming a more formal business.

Partnership

A partnership is a form of business in which two or more people operate for the common goal of making profit. Each partner has total and unlimited personal liability of the debts incurred by the partnership. Partnerships can be a good choice for businesses with multiple owners, professional groups (like attorneys), and groups who want to test their business idea before forming a more formal business.

Cooperative Business

(a.k.a co-op) use a cooperative business structure: for-profit, limited liability, but with members of the co-op share decision-making authority. Co-ops normally fall into three types: consumer co-ops, producer co-ops (common in agriculture) and worker-owned companies. Co-Ops are fundamental to the ideology of Economic democracy.

Limited Liability Company (LLC)

A situation in which the liability of the owners of a business is limited to the full paid-up value of the share capital. In the United States and some other countries, a limited company is known as either a corporation or a limited liability company.

Private Limited Company (Ltd)

A small to medium sized business that is often run by the family or the small group who own it. The owners and managers are only liable for the business up to the amount they have invested in the company, and are not liable for the debts incurred by the company unless they have signed a personal guarantee.

Public Limited Company

A business with limited liability, a wide spread of shareholders and in the UK, a share capital of over £50,000. The owners and managers are only liable for the business up to the amount they have invested in the company, and are not liable for the debts incurred by the company (unless they have signed a personal guarantee, which usually is not the case for a large corporation).

Classifying Businesses

Businesses can be classified in many ways, but one of the most common is by their primary profit-generating activities. For example:

* Manufacturers produce products, from raw materials or component parts, which they then sell at a profit. Companies that make physical goods, such as cars or pipes, are considered manufacturers.

* Service businesses offer intangible goods or services and typically generate a profit by charging for labor or other services provided to government, other businesses or consumers. Organizations ranging from house decorators to consulting firms to restaurants and even to entertainers are types of service businesses.

* Retailers and Distributors act as middle-men in getting goods produced by manufacturers to the intended consumer, generating a profit as a result of providing sales or distribution services. Most consumer-oriented stores and catalogue companies are distributors or retailers.

* Agriculture and mining businesses are concerned with the production of raw material, such as plants or minerals.

* Financial businesses include banks and other companies that generate profit through investment and management of capital.

* Information businesses generate profits primarily from the resale of intellectual property and include movie studios, publishers and packaged software companies.

* Utilities produce public services, such as heat, electricity, or sewage treatment, and are usually government chartered.

* Real estate businesses generate profit from the selling, renting, and development of properties, homes, and buildings.

* Transportation businesses deliver goods and individuals from location to location, generating a profit on the transportation costs

There are many other divisions and subdivisions of businesses. The authoritative list of business types for North America (although it is widely used around the world) is generally considered to be the North American Industry Classification System, or NAICS.