Types of Business Ownership

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Types of Business Ownership

Do you want to decide the structure of your business? Before doing that, you need to know about the various forms of business ownerships first. There are seven types of business ownership. You will need to research about the different structures because choosing the right type can ensure a positive impact on the business itself. This is because of the varieties of business ownership that factor into how the business is organized and handled.

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Types of Business Ownership

1. Sole Proprietorship

Sole Proprietorship

The name Sole Proprietorship tells us that it is one individual business. It does not usually get registered with a state. There are quite a few advantages to forming a sole proprietorship business. Firstly, it is the easiest and simple to form among all the types of business ownership.

With this form of business, the owner has the option of completely blocking out other’s opinions. There is hardly any government regulation for a sole proprietorship business. If a business has advantages, there are bound to be some disadvantages as well.

There are a few drawbacks, for instance, the business stops once the owner dies. The owner shoulders all the responsibilities of the company’s obligations. These are some of the most noticeable drawbacks of a sole proprietorship.


2. LLC

LLC - Types of Business Ownership

The full form of LLC is Limited Liability Company. It is for those individuals who do not want to take responsibility for the company’s loss. With an LLC, there are some benefits that include the chance to conduct business as a single individual. This can take place through a company where you have zero personal financial links to losses incurred by your company.

If there is any possibility of you losing money through the LLC, you are not liable here. Additionally, this move protects a person’s personal assets at all times. If you create an LLC, it results in an increase in popularity for you in the eyes of the public. The rise in popularity happens when you sell a service or a good and it makes it easier to obtain loans.

Business owners have to form LLCs under state laws and these laws vary from one state to the other. The future business owner has to file the Articles of Organization with the Secretary of State’s office. Keep in mind that, the future business owner needs to complete the action in the state they want to register. Every LLC business owner needs to account for the changes in address, membership or services if any take place.


3. Partnership

Partnership - Types of Business Ownership

A partnership is divided into two types: general and limited partnership. Both of these types of business ownerships have benefits as well as drawbacks. A lot of those benefits and drawbacks come in the form of tax implication and business infrastructure. So, here is a short description of both these types of business ownership:

General Partnership: In this format, the business infrastructure is created by two people and both can conduct the business as partners. Each of the partners will be personally liable eventually if the other partner is unable to pay a debt. They are also held equally liable to the partnership. The partners should just draft a verbal or written agreement which states that they are intent on entering a general partnership.

It is not necessary to follow certain instructions when you conduct business with this infrastructure. The partners have complete freedom to conduct business inside the company as they deem necessary. These types of business ownerships have been highly popular among people specializing in law or medicine.

Limited Partnership: If two or more individuals come together and mutually agree to form a partnership. Then it is called a limited partnership. Every partner is responsible solely for the amount they invest in the business.


4. For-profit Corporations

For-profit Corporations

Of all the types of business ownership, a for-profit corporation is the most beneficial. With this type, the corporation can be treated as an individual since the corporation is able to initiate legal suits. The corporation can even be sued, purchased/sold real estates and can break law such as committing fraud. The for-profit corporations are divided into two categories: S Corporation and C Corporation.

The S Corporation is regarded as a “pass-through” entity for any tax purpose. On the other hand, C Corporations are considered a completely independent existence from the owner and managers. You will want to choose between one of these corporations, given the benefits of running one. However, you will have to research on the benefits that come with these types of business ownership.

There is a very obvious difference between these types of business ownership. Each corporation has a distinct tax implication which becomes applicable when you conduct either of them. The owners of a C Corporation are taxed on the income they get and nothing extra. On the other hand, the owners of an S Corporation are actually taxed.


5. Nonprofit Corporation

Nonprofit Corporation - Types of Business Ownership

The organization which works solely for the benefit of general people is the nonprofit corporation. One can establish the corporation purely for the benefit of a specific population. These populations consist of the handicapped, the mentally ill and the animal population. However, the goal of a nonprofit corporation is to serve the general public interest.

A nonprofit corporation has many benefits. For instance, if you run a nonprofit corporation, you can easily avoid paying taxes. This is true specifically when you conduct business with a 5019 © (3) nonprofit. Additionally, you will be eligible to apply for and receive public/private grants.

A nonprofit corporation is usually organized as a corporation. There are a few states where you can form it as an LLC. As you may already know, LLCs are not exempt from paying taxes. However, it is an interesting prospect for a nonprofit corporation to operate as an LLC.

The plan works as long as the LLC opts to treat as a corporation for tax purposes. Additionally, the LLC needs to have a nonprofit goal but there a few states that do not comply with it.


To conclude, these are the most prominent types of business ownership in the world of business. Now, the decision is ultimately up to the new business owners to choose which type suits them best.

kacnika mom kacnika mom
3 min read

kacnika mom kacnika mom
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kacnika mom kacnika mom
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