Small business is defined as an independently operated or owned business with limited size and revenue depending on the type of industry.
These types of businesses typically employ few workers and are not very dominant in the business field. Nevertheless, being small does not really mean being insignificant. A lot of small businesses have gained a competitive edge, earned big profits, and have successfully made it to the top within their category.
Knowing what business to pursue is crucial before one decides to engage in any business venture. However, learning about the types of small businesses is also of absolute importance, especially those who want to start this category.
Sole Proprietorship
A sole proprietorship is the most common type of small business. One person owns this. The owner of the small business can sometimes be a married couple. One of the distinct features of a sole proprietorship is fewer tax duties. However, a sole proprietor has more flexibility in running his business.
Partnership
A partnership is represented by shared responsibilities among two or more individuals. Partnerships come in three common types, namely limited partnerships, general partnerships, and joint ventures. Partners must know each other well for a partnership to work and succeed effectively. Prior professional encounters and dealings by the people involved can also be of great help in this type of small business.
Corporation
This type of small business is owned by shareholders who are accountable for the debts and liabilities. Since corporations are already well-established businesses, they can easily deal even with double taxation and expensive administrative fees at shareholder and corporate level alike.
Limited Liability Corporation
Limited liability corporation, shortly known as LLC, is another small business type that tends to have a sort of link between a corporation and a sole proprietorship. In this type, there’s special protection given to the company owner from litigation. But such protection only applies to a certain extent. LLC is the easiest to set-up, most flexible, and the ideal type for new businesses.
Cooperative
The structure of this type of small business is somewhat similar to non-profit organizations. In a cooperative, the members are referred to as owner users. In this type, bylaws should be properly agreed upon, and everyone shares the same input when it comes to running the cooperative.
