It is very important to select an appropriate type of business ownership before taking any initiative. This is so because if you are not clear about the type of business, then you cannot properly estimate the budget and other resources of your business. There are many types of business ownership. Here we will explain these types one by one.
Sole proprietorship: This is the most common type of business ownership. In the sole proprietorship, only one person is engaged in all the activities, and no formal organization is established to run the business. If a person is going to establish this type of business under some assumed name, then there is a need to register this name with your state or country. All the profits and losses are shared by the individual who establishes this type of business.
Partnership: This type of business is generally owned and controlled by two or more people. This form of business ownership is further divided into two types: general partnership and limited partnership. In general partnership, all the partners have unlimited liabilities whereas in a limited partnership, at least one person has limited liability and one has full liability. A legal document, “Articles of Partnership” is formed that contains all the information about the investment of partners and their liabilities.
Joint Stock Company: This form of ownership is created by a group of people to share their profits by providing a specified amount of capital. These people are called shareholders. A Joint Stock Company covers most of the disadvantages of a partnership. Usually, there are 20 or more than 20 people who establish this type of business. An appropriate name is given to this business and owners need to get it registered with the Registrar of Companies.
Limited Liability Company: This is known as a hybrid type of legal structure because it offers the feature of partnership and corporation too. People who own LLC are called “Members.” LLCs cannot be taxed as a separate legal entity, and all the profit and losses are transferred to members of LLC.
So these are the most common type of business ownership that is owned and controlled by the people. It depends upon the resources, budget and the interest of the people that what type of business ownership they want. A wise selection can bring positive results for owners.