If you’re starting your own business, you’ll want to create a business plan as well. A proper business plan will help you better to outline your business goals before committing to one. Take one step at a time, and you’ll be on your way to successful business ownership. Here are the top 7 business types to help you pick which types of business is right for your startup.
Types of Business
- Sole Proprietorship
A sole proprietorship is one of the most popular business structures. It is a business that’s owned and operated by just one individual. Being the business owner you are accountable for all of the profits, liabilities and legal issues that your business may encounter. Which also means the business runs solely on your finances. However, to lower the financial burden a small business loan for sole proprietors can be very beneficial. It can help in the money management and long-term growth of your business.
A partnership business is owned by two or more people. With this type of business, the responsibilities, including financial and legal, fall upon each business owner. This type of business requires you to register your business with your state and establish an official business name. You’ll then be required to obtain a business license, along with other documentation. In times of financial crunch, you can fund your business operations by availing a business loan without blowing out your or your partner’s personal savings.
- Limited Partnership
There are two types of limited partnership- The General Partner and The Limited Partner. The general partner is generally involved in everyday business decisions and has personal liability for the business. On the other hand, the limited partner is not liable for debts and don’t take part in regular business management of the company. Just like a general partnership, in a limited partnership agreement, you need to get your business registered.
A corporation is a fully independent business that’s made up of multiple shareholders who are provided with stock in a business. Most likely, if you’re starting off as a smaller business, especially one that only operates online, declaring yourself as a corporation wouldn’t be appropriate. However, if you’re already an accustomed business with several employees, listing your company as a corporation might be the correct move. You’ll also need to file very specific documents with the state, followed by obtaining the appropriate business licenses and permits.
- Limited Liability Company (LLC)
Limited Liability Company, better known as an LLC is a newer type of business that is a blend between a partnership and a corporation. In this business, the LLC owners are referred to as members and not as shareholders. LLCs aren’t taxed as a separate business entity and all profits and losses are moved from the business to the Limited Liability Company (LLC) members. This type of business allows small groups of people to easily form a company together.
- Nonprofit Organization
A nonprofit organization is a business organization that’s intended to promote educational or charitable purposes. The “non-profit” aspect comes into play in that any money earned by the company will be kept by the Non-profit organization to pay for its expense, programs, etc. Also, keep in mind that there are several types of nonprofits available. Getting started with this process requires filing paperwork, including an application, with the government for them to recognize you as a non-profit organization.
A cooperative is fully owned and operated for the benefit of the members of the organization that uses its services. Whatever the cooperative earned is then shared among the members themselves. Unlike other types of businesses, which have shareholders, cooperatives sell shares to cooperative members. The difference in the process of becoming a cooperative, as opposed to the other types of businesses listed, is that your organization must create bylaws, have a membership application and also have a board of directors with a charter member meeting.
Once you decide what type of business is best for your startup, you can even check your local and state laws regarding running a business out of your home. This is crucial as zoning laws can sometimes be an essential factor in making the decision about the type of business you want to create.