v Business
and its types
A Business, also known as an enterprise, agency or a firm, is an entity involved in the provision of goods and/or services to consumers. Businesses are prevalent in capitalist economies, where most of them are privately owned and provide goods and services to customers in exchange for other goods, services, or money.
There are 3 types of business…
Types of Business:
1. Service Business:
A service type of business provides intangible products (products with no physical form). Service type firms offer professional skills, expertise, advice, and other similar products.
Examples of service businesses are: schools, repair shops, hair salons, banks, accounting firms, and law firms.
2. Merchandising Business:
This type of business buys products at wholesale price and sells the same at retail price. They are known as "buy and sell" businesses. They make profit by selling the products at prices higher than their purchase costs.
A merchandising business sells a product without changing its form. Examples are: grocery stores, convenience stores, distributors, and other resellers.
3. Manufacturing Business:
Unlike a merchandising business, a manufacturing business buys products with the intention of using them as materials in making a new product. Thus, there is a transformation of the products purchased.
A manufacturing business combines raw materials, labor, and factory overhead in its production process. The manufactured goods will then be sold to customers.
Forms of Business:
1. Sole proprietor:
Typical sole traders include the man-in-a-van type of occupation such as a plumber or electrician. However, the term can also apply to people who run small, web-based businesses from home.
This is the simplest and the most common type of business out there. The sole proprietor is responsible for everything the business does. You trade under your own name, with no separation of assets and liabilities. This means that you’ll be held personally liable for any debts that the business incurs.
2. General Partnership:
A General Partnership is composed of 2 or more persons (usually not a married couple) who agree to contribute money, labor, or skill to a business. Each partner shares the profits, losses, and management of the business, and each partner is personally and equally liable for debts of the partnership. Formal terms of the partnership are usually contained in a written partnership agreement.
3. Company:
Companies are owned by shareholders who each put an amount of money into a central pool. This pool of capital is then added to by borrowing and other forms of finance. Directors run the company on behalf of shareholders, who receive a share of the profits. Each shareholder receives a portion – or share – of the company that is equivalent to what they put in.
A company is seen as a legal entity that is entirely separate from the shareholders.
4. Corporation:
A Corporation is a more complex business structure. A corporation has certain rights, privileges, and liabilities beyond those of an individual. Doing business as a corporation may yield tax or financial benefits, but these can be offset by other considerations, such as increased licensing fees or decreased personal control. Corporations may be formed for profit or nonprofit purposes.
5. Franchise:
Franchises are licensing arrangements whereby an individual or group can buy the right to trade and produce under a well-known brand name in a given locality. A franchise involves you using another company’s successful business model – and name – to establish your own business. The franchisee benefits from working for themselves while having the privilege and reputation associated with a much larger group.
