Types and Forms of Businesses

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Types of Business - Forms of Ownership

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Types and Forms of Businesses By: Khushi and Zahra

Co-operative

business owned, controlled, and operated by a group of people for their individual benefits.

i.e. Canadian Press, Farmers of North America

Disadvantages: difficult to maintain secrecy of the business affairs since the members have to annually submit reports to the Registrar of Cooperative Societies; since a member only joins for their own interest there is lack of mutual interest amongst the member of the business

Advantages: easy formation - members interested in the cooperative business can legally register themselves; the cooperative business still exists after the death of a member

Franchise

joint venture between a franchiser (original company) and a franchisee (company purchasing rights to sell franchiser's goods or service)

i.e. Marriott International, McDonalds, Subway

Disadvantages: costly - initial cost to purchase a franchise is very expensive; franchise has to agree to buy products from the franchiser

Advantages: offers independence of small business ownership supported by benefits of a large business network; risk of business failure is reduced since the franchise is based off a proven idea; no need of market testing since there will already be an established market share

Corporation

single legal entity; considered from their owners - corporations, themselves, are liable for their debts and actions

i.e. Adidas, 7-Eleven

Disadvantages: more paperwork is required considering corporations are monitored by governments; requires more time and money to form a corporation as opposed to other business structures

Advantages: owners are not entitled to personally pay off debts or losses incurred - the corporation will have to pay; shareholders are only liable for their share in the company; corporations have perpetual lifetimes - after the death of an owner, the business is still ongoing

Partnership

formal arrangement of 2 or more parties to manage and operate the company; the profit is equally distributed amongst all parties

i.e. Apple Pay and MasterCard, Uber and Spotify

Disadvantages: liable for their own debt and their partners'; chances of disagreement - delay in making the final decision

Advantages: start-up costs are low; granted a larger loan capacity; establishment of partnership has a fast process

Sole Proprietorship

single owner; one person sets up and runs the business

i.e. catering service, landscaping, tutoring

Disadvantages: held accountable for their employee's deeds; have to pay back all the debts and required to fulfill all the duties for the compaany

Advantages: proprietor has complete power while decision-making; proprietor keeps all the profit made

Non- Profit

A business which is tax-exempt. Founders do not make profit from the net earnings.

i.e. Red Cross, Doctors without Borders, WWF

Disadvantages Prohibited from lobbying: cannot engage in political campaigning despite beliefs and platform High competition for grants No profits for shareholders

Advantages: Exemption from tax Grant eligibility: allowed to request donations from the public, foundations and government agencies to receive funding Limited liability: won’t be personally held accountable to the company’s debt

E-Commerce

buying or selling of goods and services or transfer of information online.

i.e. eBay, Amazon

Disadvantages: - Consumers have doubts because they may have not experienced the product and have only seen pictures - Tax and regulations (overseas shipment) - Consumers’ fear of credit card fraud - Identity fraud

Advantages: - Accessible anywhere (minimal geographical limitations) Saved money on rent and maintenance, Saved money on employee payroll expenses

Manufacturing

uses raw materials or parts to create a final product.

i.e. technology manufacturing. furniture manufacturers.

Disadvantages:expensive technology, import and export costs for materials, labour costs

Advantages: lower tax burden- overhead costs are tax deductible

Merchandising

resells products to consumers.

i.e. retail clothing, supermarkets (Walmart)

Proper advirtisement and appeal is key to attracting consumers to their merchandising business

Disadvantages: overhead cost, staff demand, expectation, competition

Advantages: multiple chains=more money, spotlight/popularity= more sales

Service

offers intangible products

i.e. consultations, barbers, dentists

Disadvantages: demand cutback, competition

Advantages: minimal inventory, customization, room for more