Type of Business Ownership

Running a business is no joke. It entails a lot of responsibility and risks. As the owner, you should know how to address the different aspects of the business and from the very start, you should already decide on the business ownership.

Basically, there are three types of business ownership – sole proprietorship, partnership, and corporation.

In the recent years, you can already find other ownership types like multi-national corporations, non-profit organizations, and franchises. You should know the differences of these types of ownership, so you can make the right choice.

Different Ownership Types

A business that is owned/operated by an individual is called ‘proprietorship’. As the sole owner, all decisions will come from you and you can enjoy all the profits, as well as the lower taxes. However, potential problems or liabilities incurred by the business will be shouldered by you alone and you have no one else to share the loss. When a business is operated by 2 or more persons, this is already classified as ‘partnership’. Regulations are not many and you can start out with ease. With the combined skills and knowledge of partners, the business will become strong. When there are disputes or misunderstandings, it can cause problems that will affect the business.

A business that is operated by officers and owned by investors or stockholders is called a corporation. This is a complicated form of ownership and you will be subject to double taxation – individual and corporate tax. However, you will also enjoy limited liability and the risks are shared.

Businesses that are involved in selling products or services in different countries are called multi-nation corporations. Institutions that operate simply to cover for their operating costs are called non-profit. Franchises are owned and managed by one or more persons but a percentage of the earnings will be paid to the corporation. Now that you know the types of business ownership, you can make a choice.


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