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Types of Businesses and Forms of Business Organizations

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The term business has very vast meaning in it. It is an organization which is involved in any production or services. Business can be for profit purpose or it can be for non-profit purpose, which is for any social issues. Business is also referred as the team work of some people who are joined together for the purpose of preparing and selling some items or services for sake of profit.

Business can also be defined as an entity where people share some services and their produced items for having some sort of monetary benefit. Every organization needs some capital to start and end users of its products to whom they can sale their goods and make profit on regular basis.

Some businesses are owned privately by sole entity, some are owned by the state and some are started for non-profit purposes. We can learn more about business to join online mba programs but here I like to write about according to my knowledge and little bit research.Business in broader terms can also be defined as trading goods and services to make higher profits for its owners.

Basics of Business

In order to start the business first of all the business man needs some ideas for it and then he does the market research about the people he will be targeting. Market research is helpful to check either the business going to be started will be profitable or not. While naming the business a person should consider that name of business should be very unique, related to business and easy to pronounce.

In order to start the business, business plan is very necessary. In this plan all the strategies of the business are mentioned from its commencement to all its working. With all these things business should be legit and all the legal requirements should be fulfilled for the proper working of the business.

Types of Businesses

Business can be termed as an organization that uses some of the resources to produce some goods and services and sell them to the end users for making profits to the owner. These profits can be in monetary terms or it can be in shape of some other commodities.

A business can be divided into different categories majors are as under

  1. Manufacturing business: In this kind of business producer invest some amount, buys raw material and produces some products for the end user to satisfy their needs. For example preparing clothes from raw material; etc.
  2. Merchandising business: In this kind of business owner buy products at the whole sale price from the manufacturer and sells them at the retail price to the end user. For example cold drinks, beauty soaps etc
  3. Services: In this business no commodities or goods are provided to the customer. Business man offers his services to the end user and earns profits. For example lawyers, doctors etc
  4. Hybrid: in this form of business all the three types are involved. If we take an example of a restaurant we can see that they produce meals from raw material (manufacturing), they also serve cold drinks (merchandising) and also waiters take orders from customers and fulfill them.

Forms of Business Organization

In general view there are three forms of businesses which are given below

  1. Sole proprietor ship

It is easy to form and can be started with the little bit of capital. The owner of this business faces all the risks and if the business does not pay back the owner faces all the losses. Personal interest is involved in it and it is directly associated with the profit and prosperity of the business.

Legal restrictions are very limited and it is very easy to end up the business if losses are increasing. The owner of the business has direct relation with customers and there is not any chance to leak the secrets of business at any cost. As the owner is the only person to take all the decisions he can take any decision quickly to take profits.

Owner is the sole decision maker and all the management is under his control. The capital is short and there is a chance of losing all the capital at once.

  1. Partnership

In this kind of business two or more persons are joined to start up the business. They share capital of business. In this form profits and losses are divided equally and one person is not liable for all the loss.

Limited capital and risks of heavy loss is involved in it. The partners are depended to each other which can lead to late decisions which will ultimately lead towards losses. If the losses are unbearable then there is a chance of selling private properties to cover up all the losses

  1. Company

The company is based on different stakeholders who share all the profits. It has a separate identity legally apart from its owners. It has a proper hierarchy to operate the company matters and there is very no liability of stakeholders. The capital is increased by selling shares to general public and those people who buy shares are called shareholders. In company the decision makers are the board of directors who make decisions and policies to run the company in a profitable way. In company we have further two types

  1. Public limited company

The public limited company offers its shares to general public and the minimum number of members of seven. There is no limit of maximum members. The shares are offered through Performa or prospectus. Partners of this company have no fear to face losses. All the risks are divided in investors. But there is a problem that these companies do not include personal interests.

  1. Private limited company

This type of company is sort of private company. The number of members in this company starts from two members and it cannot be exceeded more than 50 members. Members share profits of the company. The shares are transferable but only to the members of the company not outside that.


In the end business is the entity which is designed to create the profits for its owners and deliver the goods and services to the end user. Business also helps to strengthen the nation and create prosperity either it is started in any form. But it is very important to pay full devotion and hard work towards it.

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