Types of Business Ownership



A company is often categorized based on who owns it and determining who owns it is one of the most crucial business decisions. Since ownership decisions have a long-term impact on the company's future, this decision must be made after consulting with a lawyer or chartered accountant. Before dealing with the company's own decisions from various types of Business Ownerships, considerations such as the nature of the business, vision, purpose, levels of the business, nature of operations, regional and political factors, and so on must be considered.

Following are a few types of Business Ownerships:


1.    Sole Proprietorship

Almost every business begins as a sole proprietorship due to the ease of doing business and the limited size. The firm's ownership is typically vested in a single individual, who is also the industry's sole decision-maker. The proprietors are usually the ones who own the whole business's properties and the income it generates. The proprietors have complete control over the decision-making process, making dealing with the business more straightforward for the general public and other stakeholders. The sole proprietorship's owners earn all of the company's earnings, which they may reinvest or keep for personal usage. If the worst-case scenario occurs, the company is simple to liquidate since all power is vested in a single individual, eliminating various decision-making processes and saving time.


2.    General Partnerships

General partnerships, unlike sole proprietorships, include two or more individuals as company owners. These individuals do refer to business partners. A legal arrangement is made between them about the business's legalities, including business aspects, benefits division, job and obligation division, and a way out if one or both partners wish to terminate the partnership.

It is a well-known fact that if well-defined mechanisms are not defined, any relationship will end at some point in time or during a crisis. If all goes well, this is one of the most common forms of business ownership. There are two types of partners which can be present in Partnership business


  1. Active Partner – one who takes an active part in the business management
  2. Sleeping Partner – who takes little or no part in business activities


3.    Limited liability Company 

Unlike a limited liability partnership, a limited liability corporation (LLC) divides the owner's personal and professional properties. In other words, if your company is sued or goes bankrupt, your home, vehicle, and personal savings are protected. LLCs, including sole proprietorships and corporations, do not have to pay additional federal income taxes or the costs of becoming a corporation. However, depending on where they live, they could be subject to additional state taxes. Furthermore, since LLCs come under the category of self-employment, those taxes apply to them as well. An LLC is a good option for a business owner who is willing to take a little more risk or protect their personal properties.


4.    Corporation

A-C Corporation, also known as a standard corporation, is a distinct legal entity from its members. This means they have the most defence from personal liability. When it comes to financing, corporations have an advantage: stock. Since stock is a portion of a company, when people purchase stock, they effectively purchase ownership and decision-making responsibilities. However, forming a company is more expensive than creating some other type of business structure. Not only are they legally obligated to maintain more notes and report more often, but they are also expected to pay income tax. 


In some instances, earnings are taxed twice: once on profits and then on dividends paid to stockholders. Corporations become strong when so many different stakeholders contribute to the same sector. If anyone leaves, the company is mainly unchanged. A corporation is a good framework for a business owner looking for a little more risk, good financing options, and the possibility of potentially “going public,” which means selling stock to the public.


5.    Cooperative Societies

Cooperative societies are a form of private ownership that combines broad partnerships with the characteristics of a company. Members of cooperative societies pay to purchase shares, and profits are distributed to the members. A harmonious society has only one vote, which prevents power from being concentrated in a few hands. Cooperative societies, including public limited companies, have a board of trustees and host shareholder meetings regularly. Cooperative societies are founded on the principles of collaboration and self-help and obtaining necessities of daily life at reduced prices.