Different Types of Businesses

Sole Proprietorship

Example

Geordee Grable Pollock Dentistry

Characteristics

  • Owned by one person
  • The business rises and falls with the owner
  • Owner keeps all the profits
  • All earnings are taxed as income of the owner

Advantages and Disadvantages

The Good... You are your own boss


The Bad... Long hours

"WOW" facts

This type of ownership is often looked to as a desirable venture due to the straightforwardness. Also, there are 20 million sole proprietorships in the US alone.

Partnership

Example

Ben and Jerry's

Traits

  • Consists of two or more people
  • A general partnership is when all partners help run the business
  • A limited partnership is when at least one general and one limited/silent partner
  • A LLP partnership is an ownership plan that allows general partnership with limited liability

Advantages and Disadvantages

The Good... In this type of business organization, it is very easy to expand business volume by admitting new partners and can borrow money easily


The Bad... No doubt, in partnership, capital, is greater as compared to sole proprietorship, but it is small as compared to Joint Stock Company. So, a business cannot be expanded on a large scale

Interesting Facts

  • Only 2.5 million partnerships in the US


  • A mutual agency makes it so everyone is "on the hook" for expenses

Corporation

Example

Fisher Price

Characteristics

  • A legal entity, meaning it is a separate entity from its owners
  • Owners are called stockholders
  • A corporation is treated as a “person” with most of the rights and obligations of a real person.
  • A corporation is not allowed to hold public office or vote, but it does pay income taxes

Advantages and Disadvantages

The Good... There is a continuous succession of stakeholders


The Bad... Forming a corporation requires more time and money than forming other business structures

Other Facts

  • Corporations may own property, enter into binding contracts, borrow money, sue and be sued, and pay taxes
  • Investors in a corporation need not actively manage the business, as most corporations hire professional managers to operate the business

Franchise

Example

McDonalds

Traits

  • A privilege of a public nature conferred on an individual, group, or company by a government
  • For the franchiser, the franchise is an alternative to building "chain stores" to distribute goods that avoids the investments and liability of a chain
  • The franchisor's success depends on the success of the franchisees
  • The franchisor is a supplier who allows an operator, or a franchisee

Advantages and Disadvantages

The Good... A franchise increases your chances of business success because you are associating with proven products and methods


The Bad... Franchisees are required to operate their businesses according to the procedures and restrictions set forth by the franchisor in the franchisee agreement

Facts

  • Thirty three countries have laws that explicitly regulate franchising, with the majority of all other countries having laws which have a direct or indirect impact on franchising
  • Franchising is also used as a foreign market entry mode

Non-For-Profit Organizations

Example

Boy Scouts of America

Characteristics

  • Nonprofit organizations are trusts
  • Organized for a charitable purpose
  • Qualify for tax-exempt status from the federal government
  • Referred to as 501(c)(4) organization

Advantages and Disadvantages

The Good... They do not have to pay federal taxes on their net income


The Bad... The organization must be devoted to charitable causes

Extra Facts

  • Nonprofit organizations are prohibited from political campaigning
  • Nonprofit organizations are responsible for all employer obligations such as obtaining an Employer Identification Number (EIN) from the IRS