Kinds of business: 10 different types of businesses

There are different kinds of business organizations. We will discuss a list of 10 different types of businesses, their examples, and their structure.

List of 10 different types of businesses

1. Sole proprietorship
2. Limited liability company (LLC)
3. Partnership
4. Corporation – C corp
5. Corporation – S corp
6. Corporation – B corp
7. Corporation – nonprofit
8. Multi-National Corporations (MNCs)
9. Franchises
10. Cooperative

Sole proprietorship

In this kind of business, an individual owns and runs the business and needs not to register his name to the company. A common misconception about these kinds of business is that it only refers to the owner’s personal claims on income or property; however, if there are other employees attached to this type of business, then those too would be considered as a part of the sole proprietorship.

One benefit to running a business as a sole proprietor is that it is less time-consuming and more flexible, especially if the business owner does not have employees working with him/her. Another advantage of these types of businesses is that personal assets are protected from liabilities against the company itself.

With this in mind, it is essential to note that when a sole proprietorship exists, the business owner does not have limited liability. This means that if the company incurs debt due to unpaid taxes or heavy expenses, the individual may be forced to pay off all of these debts with their personal assets in case the business fails.

Lastly, a sole proprietorship does not require business registration and will not be recognized as an official business legally. However, it is still strongly recommended for the sole proprietorship to have a DBA (doing business as) agreement made between the company and system administrator in case of legal issues that may arise later on down the road.

Limited liability company (LLC)

The limited liability company (LLC) is a type of business structure that derives from the Uniform Limited Liability Company Act (1996 and 2006 revisions), which was adopted in some form by all U.S. states, the District of Columbia, and the U.S. Virgin Islands.

LLCs are subject to fewer regulations than traditional corporations; this means they can be used to set up companies with more flexibility and fewer regulations.

The minimum capital for establishing an LLC is the same as the minimum required by state law to establish a business entity, though most states that have adopted LLC statutes require at least $1,000. While setting up an LLC requires the filing of articles of organization, ongoing requirements vary widely from one state to another. Some require members to file annual reports; others do not. Additionally, some types of businesses are exempt from some or all ongoing formalities and need not file any documents after formation (e.g., single-member LLCs, which usually entail rental properties).

LLCs can be classified into four kinds: single-member limited liability company (SMLLC), multi-member LLC, manager-managed LLC, and member-managed LLC.

An SMLLC is an LLC with one owner who has liability protection. This means that the only money that can be taken out of the company is through distributions that have already been paid to the owner as compensation for his/her share in the business. The income left after taking care of daily needs is called “profit”, but profit cannot be immediately taken out of an SMLLC. Instead, it will go into what’s called a capital account, which are amounts put aside for future distributions.

The law does not allow self-dealing to occur among members (for example, an LLC owner may not loan money to herself). However, if any other kinds of transactions occur between the owner and the company, such as a personal guarantee or a lease from a member to the LLC, then self-dealing tax rules will apply.

A manager-managed LLC (also called a member-managed limited liability company) has one or more people that manage the LLC instead of members taking care of management tasks themselves. When someone becomes involved with running an LLC like this, they must take on any duties required by the company to go on. This often happens when the members of an LLC cannot agree on how certain decisions should be handled because there are disagreements among them. A member-managed LLC, in contrast, has all kinds of tasks decided by the members themselves instead of someone who was appointed to do specific kinds of work.

The major difference between a manager-managed LLC and a member-managed LLC lies in who holds power over different kinds of decisions regarding managing the business, handling legal issues, distributing profit/losses, and dissolution actions (e.g., selling the business). While these types of things can be assigned to managers or assistants in either kind of LLC, it is more difficult for them to occur in a member-managed LLC because it could lead to major conflicts among the members. This kind of conflict is more likely to happen if there are no specific rules that guide how decisions should be made.

An LLC which has only one owner (called a single-member LLC) is taxed like a sole proprietorship unless it elects otherwise. Multi-member LLCs (i.e., those who have 2 or more owners), on the other hand, can choose how to be taxed like either a partnership or corporation without hurting their liability protection status. The default tax status for multi-member LLCs that don’t specify different kinds of taxation in their operating agreement is partnership taxation, but they usually prefer other kinds of taxation instead because it reduces their self-employment taxes.

A limited liability company (LLC) is a type of business structure that offers all kinds of benefits present in different kinds of business but doesn’t have some disadvantages associated with them. The reason why they are so popular today is that most types of businesses need the liability protection offered by LLCs to reduce risks involved with running their own businesses. While they can still provide tax advantages, it’s not as effective as being taxed like an S-corp or C-corp. This allows members who are involved with this type of business to manage their risk effectively according to the decisions they make.

Partnership

A partnership is a business where two or more people work together to run a business. The kinds of businesses that can be set up as a partnership are almost unlimited, including hairdressers, law firms, and accountants, but also groups starting social enterprises or charities.

There are many different kinds of businesses that might decide to start a partnership. They may be two people who have a similar goal, or they might be two businesses that see an opportunity to work together. As well as this there are many kinds of partnerships, including ‘limited liability partnership’, where the business is started under a different legal structure from a company and with different kinds of protection from personal risk for those involved.

Most kinds of businesses can be created as a partnership. This includes social enterprises and charities, in addition to private companies and not-for-profit organizations. A key distinction between the types of businesses set up as partnerships is whether or not they are set up as limited liability partnerships (LLPs), which provide more legal protection than regular partnerships for the partners.

Corporation – C corp

C – corporations are specific types of businesses that follow a set of rules outlined by the Internal Revenue Service. Not all kinds of businesses file as C – corporations, and those that do usually have certain requirements for starting and operating a business. In general, people who own small businesses turn to C – corporations for a number of reasons, including limiting the liability of investors.

C – corporations are typically the preferred business structure for bigger and more established types of companies. However, there is a lot about C – corporation taxation and ownership that makes them less attractive to some types of businesses.

The C corporation is the most common type of corporation. Any corporation that does not elect subchapter S status automatically falls into this category.

The main characteristic of a C – Corporation is that it has two levels of taxation: first on corporate profits, and then on shareholder dividends. This can be particularly rough for small business owners, who report their earnings on their personal income statements, and so can be double taxed.

C – Corporations are the most difficult to manage from a tax perspective. The standard business practice of reinvesting money in your business is considered by the IRS to be a dividend rather than an asset purchase. This means that it will basically face taxation twice: once as a dividend, and again as a business expense.

Even worse, there are limits on what can be deducted as reasonable dividends. According to the IRS:

The following items are generally not deductible as a business expense:

• A dividend paid within 30 days of making a distribution out of current or accumulated earnings. This rule prevents an S corporation, whose earnings are taxed to corporate shareholders, from deducting the dividends and then having corporate shareholders claim their distributive share of those same deductions.

As you can see this creates some serious problems for small business owners. Conversely, many large corporations (especially those with foreign capital) benefit greatly from this system.

For example: When a US company makes money in another country, it may keep the money (in whole or in part) at its foreign subsidiary. This is tax-free income for the company. It’s also not taxable for the shareholders of the corporation unless they get dividends from their overseas subsidiaries.

C – Corporations are usually managed by a Board of Directors. This board is responsible for electing corporate officers, who are then responsible for handling day-to-day business operations. Individuals that own more than 2% of the “voting” stock can also elect members to the board.

The company structure of a C-corporation has stocks. Those who own the company, called shareholders, are responsible for dividing profits on their tax returns according to how many shares of stock they own.

Professional attorneys have experience in helping business owners understand their options when it comes to starting corporations. They are also able to help people who want to file their businesses as C – corporations obtain all of the licenses they need before starting.

Corporation – S corp

An S corporation is a corporation that elects to pass its net taxable income through to shareholders for the purpose of taxation. Shareholders are subject to tax on any dividends or other distributions passed through by the S Corporation.

S corporations are what they sound like: companies that elect to pass their profits directly to shareholders. This means that, unlike a traditional corporation, the S-corporation doesn’t have to pay corporate income tax. Because it’s a corporation, an S corporation is separate from its shareholders and treated as such for legal purposes.

In the United States, an S corporation is a taxable entity that has made an election with the Internal Revenue Service (IRS) to be taxed like a corporation (corporations also make this election), but is not subject to the double taxation that is typical of a C corporation. “

S corporations can’t be organized in all states and no S-corp can have more than 100 shareholders. Shareholders must be residents of the country, and there are limits on the type of shareholders an S-corp can have. For example, a sole proprietorship or another corporation cannot be a shareholder in an S-corp.

In terms of taxation the income from the company “flows through” to shareholders for federal income tax purposes and is taxed as personal income.”

While the income flows through the corporation to the shareholder, this does not mean that there are no taxes to be paid. The IRS still needs to receive its share of your profits, just as it would if you were an employee receiving a salary. As with any other business transaction, S-corp shareholders are required to report their business income on their individual income tax returns.

Corporation – B corp

B – Corporations are for-profit, limited liability companies that choose to be taxed differently than other types of corporations under US tax law. They do not have stock, instead, each member has a percentage of votes based on his or her membership level (and can sell membership), also called “points.” Directors are elected by the membership.

B – Corporations are not allowed to grow beyond 35 members, or else they lose their tax benefits. They are allowed to have foreign members, but they do not qualify for certain tax exemptions that US companies do. In fact, they must pay a 10% excise tax on any dividends paid to non-US members. B – Corporations can be converted to C corporations, which allow them to issue stock and sell it in public offerings.

Corporation – nonprofit

The nonprofit corporation, simply known as the nonprofit, is a business structure that does not pay any type of dividends to its members. It also has no shareholders and instead it caters for the general public good by creating benefits for society.

A nonprofit corporation is a legal structure that allows people to create an organization without the purpose of profit. The main function of a nonprofit corporation is to create a benefit for society as a whole. A traditional company exists to produce goods and services which generate income for its owners as well as provide employment opportunities for people, while a non-profitable company’s prime activity is to create benefit for society or an environment, thus generating no income for its members.

A nonprofit corporation can be either a charitable organization or a non-charitable type of organization. A charity organization has the primary objective of providing some kind of benefit to the public, while other types have more specific purposes, such as scientific, educational, literary, cultural or organizing sporting events. Nonprofits have similar characteristics to other business structures, such as limited liability for its members and managers; however, governance standards can vary dramatically.

There are many advantages of running a non-profit organization, including:

1. Nonprofits can be formed by various groups of people. Individuals, groups of individuals (such as friends or family), businesses, governments, and other forms of organizations can establish a nonprofit corporation, which makes it very flexible in the number of members;
2. No profit distribution. The membership has no right to distribute any profits derived from their activities;
3. Eligibility for tax exemption. Only certain types of nonprofit corporations are eligible for tax exemption. Each country (and sometimes each state) has its own conditions on the type of benefits that can be granted;
4. Financing options. There are many ways to fund your nonprofit corporation, including grants, donations, special events and activities.

Other Kinds of Business

These kinds of businesses are classified based on their nature and can fall under any of the above-mentioned types of businesses. Hence, a multinational corporation maybe a B corporation or limited liability company. Hence, the following classification of businesses is based on their location, the number of people forming the organization, nature of licensing, or the purpose for which the business was formed. But all can generally be classified under or are examples of any of the 7 types of businesses mentioned above.

Multi-National Corporations (MNCs)

Multi-National Corporations (MNCs) are corporations that operate in more than one country. The internationalization of firms has been occurring for centuries and it is vastly accelerated by advancements in technology, capital flows, and the internet. New MNCs are being established every day and corporations can now be found in almost all countries [4 ].

Characteristics of a Multi-National Corporation (MNC)

Multi-national corporations (MNCs) have several different characteristics. One is that they can influence the national economy and local labor market by transferring technology and capital, but also by transferring management know-how and skilled labor.

Another characteristic is that MNCs shift substantial amounts of financial resources across borders, which can lead to income leakage in the host country. Despite these potential downsides to foreign direct investment (FDI), it leads to an increase in total factor productivity due to spillovers of technology, management know-how, and skilled labor.

MNCs also contribute to the transfer of environmentally friendly technologies to developing countries that can help with environmental problems, but it is difficult for governments to monitor what the MNCs are actually doing in these countries.

How technology impacts Multi-National Corporations

Technology has impacted MNCs in several ways. The most obvious technology transfer is the one that directly occurs through FDI and exports of machinery and equipment. Other more indirect technological spillovers can occur when MNCs open branches or subsidiaries.

Branches tend to increase local productivity when they import intermediate inputs from the parent company. Subsidiaries can increase local productivity when they develop new technologies that are then transferred to the other subsidiaries in the same corporation.

Technology also has an impact on FDI. The more advanced technology is, the less likely it will be exported since it is specific to a certain context and hard to transfer, but MNCs have been known to export advanced technologies from one host country to another.

Franchises

Franchises are special services that you can get from a business, usually for a monthly fee. The monthly fees add up to be pretty substantial, which is why some refer to them as “time-share” businesses. The major franchises have been around for decades and have grown into international powerhouses.

This is the type of business that will give you a lot of supplies and materials. You’ll also get access to marketing tools, seminars, and other forms of training instructions on how to get your business running successfully.

Franchises are usually not very cheap, but because the initial investment is higher there’s more potential for profits down the line. These types of businesses also tend to include extensive customer support; something that can be hard to find at other types of businesses.

Many people look for franchises because they want business stability, especially after trying their hand at self-employment. Franchises are known for providing great products and services consistently, so you know what you’re getting each month without having to worry about competitors or changing trends.

When you buy a franchise, you also get instant recognition and credibility. This is important because the business is already recognized and established – people are more likely to trust it than something they’ve never heard of before.

There are different types of franchises geared towards different markets. The most popular examples are in the food (such s Mr. Biggs), clothing, and technology industries.

Cooperative

Cooperatives are businesses, organizations, or groups that are owned and run by the people who use their services. They are often known as co-ops.

Cooperatives can take many forms. For example:

1. Some people own a small business together. They meet once a month to discuss what they did well and where the business could improve. They might elect one member to be the manager of the business.
2. Some people pay a monthly fee for a service like internet, electricity, or phone service. This money is then pooled with other members’ money and used to pay an employee who works in the company office. Everyone in that cooperative gets the same service.
3. Some people pay a membership fee to use a store where all the items for sale are second-hand. Each member gets one vote at meetings, and they also get help from other members if they need it.

A cooperative is different from a business or organization that has investors. In those types of businesses, the people who own or run the business make money from selling shares of the company at a certain price.

In these kinds of business, people who use a service either become members, which means they get a voice in how a co-op is run and can vote at meetings, or customers, who pay for their use of the service but do not have a say in how a co-op is run.

A cooperative can also be different from a for-profit, or capitalist, business because cooperatives are often focused on creating benefits for the community and the environment instead of just making money for their owners.

FAQs on different kinds of business