What’s your business type?

You’ve idealized your business and now it’s time to get it formalized through registration. So, what type of business will yours fall in? Is it an e-commerce, will it be a partnership? Will you be able to pay taxes? Have you even thought about it? 

Before diving in, you need to understand the various types of businesses to know where falls and what to expect once you put on paper.

Types of businesses

Here are various types of businesses depending on the need they care for:

  1. Service business- this is a business that sells services directly to consumers or other businesses. e.g., internet
  2. Product business- this is a business that offers a tangible item for sale. e.g., selling shoes
  3. Startup– this is a term used to define an upcoming business venture.
  4. Creative business– this is a business venture that comes about from ideas and concepts.
  5. Tech business – this is a company that uses technology to provide products and services that have applications across multiple industries.
  6. Manufacture businesses– this is any business that uses raw materials, parts and components to assemble a finished product.
  7. E-commerce– it refers to a business model that allows individuals and companies to buy and sell over the internet.
  8. Enterprise– refers to a for-profit business started and run by an entrepreneur.

In the beginning anything could seem confusing, hectic and at times frustrating, especially if it’s something new to you. This is not to scare you but assist in your new found business venture. 

Types of business

Here are 4 common types of business structures:

  • Sole proprietorship

This is one of the simplest forms of business. Where the business is solely owned by one person and no legal entity is required.

  • Partnership

This is a business owned by two or more people. There are two types of partnership: 

  • Limited partnership- where there’s only one general partner with unlimited liability while the rest of the partners have limited liability. The ones with limited liability Also have limited control over the business. 
  • Limited liability partnership (LLP)– these are quite similar to limited partnerships with only one major difference, all partners of the LLP are given limited liability. This means partners are not responsible for the actions of the other partner; they are protected against debt incurred by the partnership.
  • Limited liability company (LLC)

When it comes to LLC, you enjoy benefits of both corporation and partnership business structures. In that you are protected from personal liability and profits can be passed through your personal income without facing corporate taxes.

  • Corporation

Popularly known as C corp, this type of business is a legal entity separate from its owners. When you start a corporation, you’re protected from personal liability though the startup cost is higher than other business structures. A corporation acts as an individual; it can make profits, be taxed and can be held legally liable.

Factors to consider before starting a business

Before you go right ahead and start you should consider the following:

  • Simplicity– basically, how easy is it to start, what legalities are needed and documentation.
  • Liability– a business can either be unlimited liability where your personal liability is tied to the business or  A limited liability where only your stake in the business is under risk in the event of bankruptcy.
  • Control– the more the number of owners in a business the more control is shared. This affects the time taken to make decisions and allocation of responsibilities.
  • Financing– when starting a business, a lot of capital is required. Depending on how many you are, this cost could relatively become lower.
  • Taxing– the type of business you start will dictate what type of taxes you incur. Whether a one-off tax or you may attract numerous types of taxes.

Sources: Young Mogul, economic times, oberlo, sba, montley fool, investopedia, access employment

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