TYPES OF BUSINESS

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The types of businesses fall into 6 categories:

Sole Proprietorship
Partnership
Corporation
Business Co-op
Franchising
Home Business

SOLE PROPRIETORSHIP

You and your business are considered
to be the same.
PROS
Most simple type of business
Usually only one person is involved
and the business can be run under
the persons name.
Most inexpensive type of business to
start up
Business taxes are paid through
personal income taxes; therefore,
any loss can be deducted from
income taxes.

CONS
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.
Business 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

PARTNERSHIP

A type of business that two or more people
run together, for profit.
PROS
All partners share the business losses or
liabilities and responsibilities, instead of
only one person
Partners pay business income taxes in
relation to their share in the business
Partners may have complementary skills and
experiences that one person alone as sole
proprietor may lack
Financial support is possible from each
partner.

CONS
Each partner shares liability
(consequences and
responsibilities) for the other
partners actions - You may have
to pay for your partner's mistakes.
A great deal of trust is needed
among partners
Business and personal assets can
be seized

BUSINESS CO-OP

This is a specific type of corporation.
PROS
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
business.
Members share support, skills,
experience and raise the money needed
for start-up costs from their individual
contribution.

CONS
Similar to those of the
regular corporation
A person who owns larger
shares also accepts larger
liability

FRANCHISING

Franchising 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.
PROS
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.

CONS
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.

HOME BUSINESS

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.
PROS
Lower start-up costs; you dont 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

CONS
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.