Types of Business Ownerships - Assignment Example

Business Functions Business Functions Types Of Businesses Various forms of businesses are operational in the present day society and these businesses are differentiated on the basis of product or service that they have to offer. The purpose of these forms of businesses is to attain or maximize profit. One type of business is service business and this form of business is categorized by the intangible products (services) that it offers to its customers (Jackson, 2009). This means that a service business offers to those products that do not have a physical form and the product cannot be touched or seen but it can be felt through the senses of a customer. For example the education that is offered in schools and universities cannot be touched or seen but it can be felt and the schools and universities are a kind of service business. A second form of business is called the merchandising business. This form of business tends to purchase goods at lower or wholesale prices from a manufacturing business and then they tend to sell these products at a higher price to its customers (Jackson, 2009). The difference between the price at which a merchandising business obtains products and the price at which it sells the product is regarding as profit for the business. Another major feature of the merchandising business is that it does not change the original shape of the product they obtain from the manufacturer before selling the product. The retail outlets located near homes as well as businesses such as Wal-Mart that obtain products from different merchandisers in bulk is all examples of merchandising businesses. A third kind or type of business is a manufacturing businesses which is involved in the act of developing products that are either sold by merchandising businesses or are used by service businesses to provide service to the customers (Jackson, 2009). These businesses are most of the time not in direct contact with the customers. They sell their products to the customers through service businesses and merchandising business. Some of the manufacturing businesses need to be in direct contact with the customers. They have to directly contact the customer due to the nature of the product that they are selling. The major difference between merchandising and manufacturing business is that the merchandising business obtains products from another source to sell the product and the manufacturing business develop the product themselves in order to sell the product. An example of a merchandising business that is directly in contact with its customers is the Ford Company that manufactures automobile and need to be in direct contact with the customer to help them in understanding the difficult features of the automobile. A fourth kind of business is a hybrid business and this kind of business provides both products as well as services and cannot fall in the category of solely merchandising, service or manufacturing business. For example a restaurant is a form of hybrid business because they provide products in shape of food and drinks and they provide service by serving and preparing food for the customers. 2. Types Of Business Ownerships The first type of business ownership is sole proprietorship and in this form of business ownership only one individual owns as well as controls the entire business. This does not mean that he/she may operate individual as he/she may hire employees to work for him. Sole proprietorships and the owners of these businesses are not considered as two separate entities by the law (Bradshaw, 1996). They are considered as a single legal entity and the owner of the business is liable for all the losses as well as the debts that are owed by the business. This means that if the business goes bankrupt, the owner of the business and his/her assets will be used to repay the debt. There are several benefits of sole proprietorship including the freedom to make business decisions and enjoy all the profits from the business. But at the same time, sole proprietors experience lack of ability to fund the business. Various examples of sole proprietorships include beauty salons as well as plumbing and home cleaning services. The second type of business ownership is partnership and a business that is based on this form of ownership is typically owned and controlled by two or more than two individuals. These forms of businesses are mostly family owned businesses that are owned and controlled by the members of a single family (Bradshaw, 1996). A major benefit of this form of business ownership is that there is more than one mind that makes business decisions which results in more ideas for running the business. The profits in this form of business are shared between the partners and new partners cannot join the partnership without the consent of other partners of the business. Similar to the case of sole proprietorships, owners of these businesses even experience unlimited liability. This means that in case of losses and debt, the assets of the business owners are liquidated in order to pay off the debts. Examples of partnerships include law firms in which different lawyers may join hands to start a law firm or a dental health care centres in which different dentists may join hands to start a business. The third form of business ownership is corporations which are mostly opted by organizations that are larger in size. The law treats a corporation as a separate individual and in order to start a business based on this ownership type it is essential to file for incorporation with the government of the region in which the business is starting up. Incorporation provides the organization with the legal guidelines that need to be followed in order to operate in a legal manner. Corporations have its own laws other than the laws of the land that it has to follow. These laws are the reflection of the standard operating procedures of the business that all members of the business have to abide by (Bradshaw, 1996). A corporation is even required to for a board consisting of directors who make business’ financial as well as operational decisions. The owners of the corporation are shareholders who are only liable to the extent of the amount of money they have invested in the business. In case of losses or bankruptcy, the amount of money that stockholders have invested is at stake. A major example of a corporation is Facebook that is operating on the stock exchange and has several shareholders. 3. Factors That Need To Be Considered While Starting An Entrepreneurial Venture There are various factors that an entrepreneur needs to consider while starting a new business. First entrepreneurs need to decide about the type of business that they want to start. They need to decide whether they want to start a service, merchandising, manufacturing or a hybrid form of business (Stokes, 2010). Next they have to decide about the size of their business and the region they will be operating in. They need to decide whether they are going to start a small scaled, medium sized or large scale business. The area of the business is essential in order to identify the amount of competition that entrepreneurs will be experiencing. The third factor they need to consider is the amount of control they want over their business decisions and profitability and while considering this factor they need to decide whether they want to operate as a sole trader, start a partnership or a corporation. Another significant factor that they need to consider is the amount of money that will be needed to start the business and the sources of finances they need to opt for. They need to decide whether they are themselves going to invest in the business or obtain funding on the basis of loans or obtain finances through other sources (Stokes, 2010). Before starting a business the entrepreneur even needs to identify the product or service that they are going to offer and the customers or the consumers for whom they will develop those products and services. In order to take these decisions the entrepreneur will be required to perform market research in order to identify needs and wants of consumers that have not yet been satisfied. A major factor that entrepreneurs need to consider is the level of governmental and legal regulations that they are ready to experience. There are different legal requirements that entrepreneurs have to experience based on the form of business ownership that they opt for. For example partnership and sole trader form of business ownership experience much relaxed governmental and legal rules and regulations as compared to corporations (Stokes, 2010). They even need to consider the management aspect into consideration. They need to decide whether they want to manage the entire business on their own or they will hire managers to control the business. This decision is made in relation with the size of the business. If the size of the business is large, entrepreneurs will have to hire managers to manage the business. Time is one of the major factors that need to be considered in order to ensure that the entrepreneur has the first mover advantage and the business is operational at the right time. If entrepreneurs fail to take this factor into consideration, it is quite likely that they will lose to their competition. References Bradshaw, J., & Brooks, M. (1996). Business accounting and finance for managers and business students. Kenwyn, Juta. Jackson, S., Sawyers, R., & Jenkins, J. G. (2009). Managerial accounting: a focus on ethical decision making. Mason, OH, South-Western. Stokes, D., & Wilson, N. (2010). Small business management and entrepreneurship. Andover, Cengage Learning. Read More