A Guide to the Types of Business

What is a Business?

A business, which can also be referred to as a company, enterprise, or firm, is a legally recognized organization that provides services or goods to a consumer base in exchange for currency. Businesses are the foundation of capitalistic societies. A business enterprise is a profit-seeking organization that seeks to earn a profit through the sale of their particular goods or services.

In the United States, a business may be privately or publicly owned. However, all profit-based businesses will institute a model aimed to increase the personal wealth of their officers, shareholders, or owners. A business structure may also be formed as a not-for-profit agency. These forms of enterprises develop a business model that aims to provide a good or service to society without seeking a monetary return. Furthermore, businesses may also be state-owned and operated.

The key fundamentals of a business--regardless of their ownership or the inclusion of a profit-generating model—are designed to provide a tangible good or service that may be purchased or used by the consumer base of a society.

Basic Types of Businesses

Each business model is unique based on the owner’s specific goals and the product or services offered. That being said, the formation of the business (how it is legally viewed and subsequently taxed) will fall into a uniform classification system. The basic forms of ownership for businesses are as follows:

Partnership: A partnership is a type of business that is typically formed to seek a profit. The fundamental characteristic of a partnership is that the physical business structure is owned by two or more people. In most cases, the multiple partners that make up the business face unlimited liability in regards to the accrual of the debts obtained by the business. Within the classification of a partnership exist three sub categories: a general partnership, limited partnerships and limited liability partnerships.

General Partnership: A general partnership is a type of business which groups together owners who form through the creation of an agreement and a proof of existence. The owners within the general partnership are personally liable for any debts and legal actions that the business may face.

Limited Partnerships: A limited partnership is a form of partnership that includes, in addition to the general partners, other individuals who stake a claim in the business’ profits as a result of their additional investments. That being said, only 1 partner of the agreement is required to assume the role of general partner.

Limited Liability Partnership: A form of partnership where some or all of the partners possess a limited liability in regards to the debts or legal actions that may arise from the company’s functions.

Corporation: A corporation is a common form of business, where the owners possess a limited liability that contains a separate legal personality from its members. A corporation may be privately-owned, publicly-owned (through the issuance of stock), or government-operated. Furthermore, a corporation may develop a for-profit or not-for-profit business model.

Cooperative: A cooperative is an organization that takes the form of a limited liability business. A cooperative may be organized as a for-profit or a not-for-profit business. A for-profit cooperative will differ from a for-profit corporation in that the members which comprise the organization are not shareholders who unilaterally share the decision-making authority.