At any point in life, if you have ever thought of starting a business, the first question that came to your mind would have been “what would be the type of business?”.
Not only you, but it’s also a common question any entrepreneur who is about to start a business has to face. Since the type of business directly affects the rights and responsibilities of the company, it is long-term planning.
The corporate world may be a difficult place to navigate, full of jargon and expert words that many individuals do not comprehend. This extends to enterprises, which are arranged differently – and called differently – depending on how they are set up.
Here is the list of 8 types of businesses you can start as an entrepreneur. These are the business types in the United States.
1. Sole Proprietorship
A sole proprietorship is the most basic sort of business and it’s when one person decides to go into business by themselves. Sole proprietorships require the least amount of paperwork and are frequently operated under the proprietor’s name.
The proprietor owns all of the company’s rights and responsibilities and is exclusively responsible for any damages.
2. General Partnership
A general partnership is similar to a single proprietorship for two or more individuals. It’s a straightforward type of business in which each partner has an equal vote in how things are run, as well as equal rights to earnings and liabilities committed by the company. A partnership agreement is normally in place when a general partnership is created.
3. Limited Liability Company (LLC)
A limited liability corporation is an entity founded by one or more people who file documents outlining the firm and how it will be handled and operated. These businesses have policies in place that govern how profits and liabilities are distributed within the organization. Limited liability corporations can participate in any authorized activity except banking and insurance, and their obligations are limited to the company’s value.
4. Limited Partnership (LP)
A limited partnership must have at least one general partner and one limited partner. The general partner oversees the company and is liable for all debts and liabilities, whilst the limited partner shares only the profits and incurs losses up to the amount of their investment in the company.
5. Limited Liability Partnership (LLP)
Limited liability partnerships are similar to general partnerships in that one partner is not held accountable for the negligence of another. It is founded by two or more partners and usually includes papers on file outlining the partners’ roles and management of the firm, as well as how earnings will be divided among them.
6. Limited Liability Limited Partnership (LLLP)
This type of company is a hybrid of an LP and an LLP. It is founded by two or more partners, with at least one acting as a general partner and at least one acting as a limited partner. The general partner is completely liable for all liabilities and debts, whereas the limited partner shares in the profits. Both partners are shielded from each other’s negligence.
Corporations are founded by filing articles of incorporation, which outline the firm and its investors. Corporations are entitled to certain tax benefits, but they may also incur certain responsibilities. Corporations are led by the CEO and, in many cases, a Board of Directors. Corporations can be founded for profit or non-profit purposes. Corporations are their own legal entity, and any liabilities they incur are retained by the corporation.
8. Federally Incorporated Banks and Trusts
Last but not least, there is a type of company called as Federally Incorporated Banks and Trusts. These can be credit unions, banks, or organizations that deal with and invest in cash. Federally incorporated banks and trusts, as the name suggests, are incorporated at the federal level and, as such, operate under separate rules and regulations.
These are the 8 types of businesses you can start if you are thinking to start one. Since the types of businesses affect the rights and responsibilities as well as bound to some legal restrictions, you have to be careful when choosing the right business type.