Types of Businesses
types of businesses fall into 6 categories:
You and your
business are considered to be the same.
- Most simple
type of business
- Usually only
one person is involved and the business can be run under the persons
- Most inexpensive
type of business to start up
taxes are paid through personal income taxes; therefore, any loss
can be deducted from income taxes.
- If you can't
pay your debts or your business fails, your personal and business
assets (your property and belongings) can be seized.
- If the sole
proprietor (owner) dies, the business dies also.
income is considered to be owner's personal earnings. Business
and personal taxes are calculated at the same rate. The more the
business makes, the higher the personal tax you pay
A type of business
that two or more people run together, for profit.
- All partners
share the business losses or liabilities and responsibilities,
instead of only one person
pay business income taxes in relation to their share in the business
may have complementary skills and experiences that one person
alone as sole proprietor may lack
support is possible from each partner.
- Each partner
shares liability (consequences and responsibilities) for the other
partner¹s actions - You may have to pay for your partner's mistakes.
A great deal of trust is needed among partners
and personal assets can be seized
- If a partner
dies, drops out of the partnership, or if a new partner joins,
then the existing partnership dissolves.
This is also
known as a 'limited company', or as 'incorporating'. A corporation
is considered as a separate and legal entity; as if it were a separate
'person'. Its owners are known as shareholders, officers, or directors.
- No person
in the corporation is personally responsible, or liable for the
business¹ debts or actions. If the corporation goes bankrupt,
only the business assets can be seized.
- A company
can choose to be federally or provincially incorporated, depending
on the scope of the business
- If an owner
leaves or dies, the corporation is not affected.
- There are
many extra costs and legalities with corporation compared to the
other types of business.
- There is
an initial cost to become incorporated usually through a lawyer.
- Company losses
cannot be used for lowering income taxes.
This is a specific
type of corporation.
- Each person
is liable only to the percentage of shares owned; for example,
a person who owns 5% of the shares is liable only for 5% of the
- Members share
support, skills, experience and raise the money needed for start-up
costs from their individual contribution.
- Similar to
those of the regular corporation
- A person
who owns larger shares also accepts larger liability
is a way of doing business and of marketing products or services.
The original company, called the 'franchiser' allows someone else
called the 'franchisee', to operate its business by selling their
products or services in a certain way.
- The franchisee
is allowed to use the established trademarks, images and proven
methods of operating the business. This usually cuts down the
risk of failure, since the franchisee doesn't start completely
from scratch.(eg. McDonalds is a franchise)
- Usually most
of the research , advertising, promotion, marketing and planning
has already been prepared by the franchiser, and is given or taught,
to the franchisee. So the franchisee doesn't have to do this.
- The franchisee
pays the franchiser a start-up fee and royalties, which are regular
costs for using the franchiser's methods, business name, images
and trademarks, and for selling it's products or services.
There is a
growing trend toward home businesses. Changes in technology and
the lowering costs of computers, faxes and modems, allows home business
to have lower start-up and regular operating costs.
- Lower start-up
costs; you don¹t pay rent for an office
- No or little
additional regular expenses such as lighting, heating etc.
- No need to
commute to work
- More time
spent with family
- Certain businesses
do much better with an office, or retail outlet
- You have
less privacy if customers must come to your home to do business.