Merchandising Business This type of business buys products at wholesale price and sells the same at retail price. They are known as "buy and sell" businesses. They make profit by selling the products at prices higher than their purchase costs. A merchandising business sells a product without changing its form. Examples are: grocery stores, convenience stores, distributors, and other resellers. Manufacturing Business Unlike a merchandising business, a manufacturing business buys products with the intention of using them as materials in making a new product.
Thus, there is a transformation of the products purchased. A manufacturing business combines raw materials, labor, and factory overhead in its production process. The manufactured goods will then be sold to customers. Hybrid Business Hybrid businesses are companies that may be classified in more than one type of business.
Partnerships can be formed with other individuals and businesses. It does not cost much to form a partnership, although tax and liability rules are different for partnerships. Think very carefully who to partner up with, since the entire company can be jeopardized if one partner makes a legal or financial mistake.
Partnership Advantages Partnerships are simple to start but take time to properly grow. The likelihood of successfully raising funds increases with partners. The money made from the business goes directly to the personal tax returns of all partners. Potential employees might be more interested in the business if they know they can become a partner in the future. Partners who have compatible skills can help a business grow.
Partnership Disadvantages Partners are responsible for each other. Partners must equally share all profits. Disagreements are likely because decisions are made together. This is the most common form of business ownership. General Partnership — A business owned by two or more people. The partners share ownership and control of the business. Limited Partnership — A limited partnership consists of at least one general partner controls the business and at least one limited partner investor.
Forming a Corporation — A corporation is a business which is considered a separate entity from you; even having the legal rights of a person. There are two types of corporations; C Corporations and S Corporations. In the United States and some other countries, a limited company is known as either a corporation or a limited liability company. Sole Proprietorship A business owned by one person. The owner may operate on his own or may employ others. Partnership A partnership is a form of business in which two or more people operate for the common goal of making profit.
Cooperative Business Cooperative businesses are often referred to as a co-ops. The cooperative business structure is for-profit, with limited liability, but with members of the co-op sharing decision-making authority. Co-ops normally fall into three types: 1 Consumer co-ops, 2 producer co-ops common in agriculture and 3 worker-owned companies. Co-ops are fundamental to the ideology of economic democracy.
Financing Company Operations A company can be self-financed or financed through the solicitation and participation of outside investors. Learning Objectives List the different financing options for small businesses Key Takeaways Key Points Financing the operation of a company can come from within the firm itself or by using external resources.
How a company is financed has implications for how profits and potential liabilities are distributed. The participation of external sources of funding may bring other benefits outside rather than just the funds themselves.
Key Terms Bootstrapping: Financial bootstrapping is a term used to cover different methods when someone wants to avoid using the financial resources of external investors. The use of private credit card debt is the most known form of bootstrapping, but a wide variety of methods are available for entrepreneurs.
Forming a Corporation — A corporation is a business which is considered a separate entity from you; even having the legal rights of a person. What do you do? Sole proprietors own all the assets of the business and the profits generated by it.
How a company is financed has implications for how profits and potential liabilities are distributed. The time limit can be continued if desired by a vote of the members at the time of expiration. Manufacturing Business Unlike a merchandising business, a manufacturing business buys products with the intention of using them as materials in making a new product.
Self Funding Financial bootstrapping is a term used to cover different methods for avoiding the use of financial resources that come from external investors.
Each of the types of ownership comes with its own inherent advantages and disadvantages and as a result its own risks and potential rewards. The owners and managers are only liable for the business up to the amount they have invested in the company, and are not liable for the debts incurred by the company unless they have signed a personal guarantee.
Debts and liabilities are also the responsibility of the owner. Conflicts between members can also arise that can have a big impact on the efficiency of the business. Unfortunately, this form of ownership is usually reserved for a group of professionals such as accountants, doctors and lawyers. Cooperative Business Cooperative businesses are often referred to as a co-ops. General Partnership Partners divide responsibility for management and liability, as well as the shares of profit or loss according to their internal agreement. Raising Capital— It is easier to raise money for certain business structures over others.
One is a general partnership where everything is divided, which includes responsibility of management and reliability and loss or profit shared, unless otherwise noted in the initial agreement. It comes with a list of advantages including: training on how to operate your franchise, systems and technologies for day-to-day operations, guidance on marketing, advertising and other business needs, and a network of franchise owners to share experiences with.
This form of ownership does allow for limited liability, similar to a corporation, but without the double taxation. Evaluate the following factors when comparing forms of business ownership: Limited Liability— limited liability ensures that your personal assets are not at stake to cover business debt. Online resource for all things accounting.