A business is simply a company where different individuals work with each other to create a profit. In a typical business, different individuals either purchase the goods or services offered by the company. The company owner is typically the one who hires workers for such work. Although the business owner does most of the actual work, he or she still has some involvement in business decisions and business operations.
There are four main types of business which include sole proprietorships, partnership, corporations, and sole proprietorship. Each type has different characteristics and differences and it is necessary to understand these differences before you can decide what type of business structure best suits you. Sole proprietorships, partnerships, and corporations are the four main types of business structures. These four main types of business ownership have distinct differences and advantages as well.
Sole proprietor: A sole proprietorship is a simple arrangement where only one party owns the assets of the business. This arrangement is not limited therefore; there are different possibilities for profit generation. A sole proprietorship is characterized by limited liability which means that if the business has any negligence on the part of any of its partners, that partner individually will be individually held responsible for the actions. Limited liability also makes it easier for businesses to meet financial obligations as they do not need partners for that purpose.
Partnership: A partnership is usually set up between two or more individuals who become members of the partnership. Partnerships are characterized by one member being responsible for the obligations of another. The other members are taxed only on their income. In some cases, the partners have to meet a minimum requirement before they can start a partnership.
Corporation: corporations are company arrangements where many people share profits with each other. A corporation is a legal structure that separates and controls the ownership of stock and assets. When you incorporate a business, it means that you will be creating a separate entity from the rest of the company. This entity will then be treated as a separate legal entity from its shareholders.
Limited Liability Company: Another one of the main types of business structures that we see is a limited liability company or LLC. This means that the owner or owners of the business do not have any joint ownership or liability. A LLC is also known as a sole proprietorship in some states. Limited Liability Company means that the owner can only use his money in the business for the business.