Types of Businesses

Introduction

• Business Definition: Combined effort of individuals to fulfill social needs and earn profit.
• Business Entity: Organization using resources to supply goods/services in exchange for cash.
• Types of Businesses:
  1. Service Business
  2. Manufacturing Business
  3. Merchandising Business
  4. Sole Proprietorship
  5. Partnership
  6. Corporation
  7. Multinational Corporations (MNCs)
  8. Franchises
  9. Limited Liability Company (LLC)
  10. Cooperative

1. Service Business

• Definition: Provides intangible products (advice, expertise, skills).
• Examples: Accounting firms, banks, law firms, schools, salons.

2. Manufacturing Business

• Process: Purchase products to produce new products using labor, raw materials, and factory overhead.
• Outcome: Sell produced goods to consumers.

3. Merchandising Business

• Operation: Buy wholesale, sell retail without changing product form.
• Examples: Convenience stores, grocery stores, distributors.

4. Sole Proprietorship

• Ownership: Single owner.
• Advantages: Easy formation, fewer taxes.
• Disadvantages: Unlimited liability, difficult capital raising, ends with owner's death/resignation.

5. Partnership

• Ownership: Two or more members contribute resources.
• Types: General partnership (unlimited liability), limited partnership (limited liability).
• Advantages: Easy capital raising, shared decisions.
• Disadvantages: Profit-sharing disagreements, limited business life.

6. Corporation

• Legal Status: Separate from owners.
• Ownership: By shareholders.
• Advantages: Limited liability, easy capital raising, unlimited life.
• Disadvantages: Complex formation, double taxation.

7. Multinational Corporations (MNCs)

• Operations: Produce/sell globally, centrally controlled.
• Examples: Honda, Coca-Cola, Nike.

8. Franchises

• Model: Buy business rights and name, pay profit percentage to parent company.
• Advantages: Easy expansion, no debt, rapid growth.
• Examples: Pizza Hut, KFC, Domino's.

9. Limited Liability Company (LLC)

• Formation: Written agreement, includes management and profit distribution.
• Advantages: Limited liability, flexible taxation (corporation/partnership/sole proprietorship).

10. Cooperative

• Ownership: Group owned for mutual benefit.
• Examples: Housing cooperatives, credit unions, utility cooperatives.