Different Types of Business Organization
Back to basics
Today, I want to reflect back on the basics of business. Nowadays, businesses range in scale and scope from sole proprietorships to large corporations, and the form of business determines everything such as the income tax return form you have to file. Thus, deciding the form of business is particularly special when starting a business. So, let's revise all sorts of business types with me!!
A business owned by one person
eg. freelance writer, personal trainer, etc.
The boss is the person making all decisions → suitable if want to go fast
Investors and/or sufficient starting funds needed → difficult to start
Everything good/bad happens depending on your business → risky
If your business is going downhill, you must file for bankruptcy → need to sell personal belongings to cover your debts & you are the only one carrying the burden.
Many public limited liability companies we see today started as sole proprietors.
A type of cooperation
eg. Uber & Spotify, Louis Vuitton & BMW, etc.
Managed by multiple people → multiple decision makers → workload, responsibility & profits/losses are shared
When things go wrong, you do not have to carry the burden alone.
Different partners can bring different skills to the business → Partners may disagree about the future direction of the business.
More partners → can raise more money than a sole trader.
There are different types of partnerships: Limited Partner & General Partner
You collaborate with the general partner & donate money → if the business goes downhill, you would only lose the amount of money you donated & if the business rise you earn your fair share.
Responsible for everything from the salary of labors to the risk of the fall of the business.
Private Limited Liability Company:
eg. IKEA, Bloomberg, Chanel, Huawei, Subway, etc.
A burden/ Extra cost/ Debts are a liability/ A group of people coming together to start a company you can do it with a minimum of 2 people/ and the shares are limited to the company, so people outside of the company cannot buy shares on this company.
Decision making is only made by the people who are in the company
Sold and transferred withing the team and other people outside the company cannot buy the shared: Like a restaurant or a local shop
Public Limited Liability Company:
Opposite of Private Limited Liability Company
eg. Apple, Microsoft, Google, Meta, Twitter, Amazon, Walt Disney, Gucci, Coca-Cola, etc.
You can sell shares outside of the company → many people can contribute in making decisions about the company
Everything is transparent
Anyone can buy company shares.
NGO & NPO (Non-Governmental & Non-Profit Organization):
Set up independently of any government to address social issues
eg. Save the Children, UNICEF, Oxfam, etc.
Very mission lead
None Profit → not set up to make profits
Raise money from private individuals, for-profit companies, charitable foundations, governments, etc. → separate from the government but depend on the government for funding
Sometimes charge membership dues and sell goods and services.
works for bettering society
B-corps (Benefit Corporations):
A company corporation set up for improving the climate
eg. Ben & Jerry's, Patagonia, Aesop, Etsy, Ecosia, etc.
Work towards slowing climate change
Startups in this field is increasing in recent years
Can be publicly traded