Forms of Business Ownership You Need To Know

 Before you venture into any form of business as an entrepreneur, you must know the basics - "What is business and its forms". This would place you in the right direction.

What Is Business?

  What is business: Business is an organisation (company, enterprise or a firm) or economic system where goods and services are exchanged for one another or for money. Every business requires some form of investment and enough customers to whom its output (goods or services) can be sold in a consistent basis in order to make profit.
  
 A business can be for-profit entity or non-profit organisation that operates to fulfil a charitable mission.

What are the different forms of business?

 Business comes in different shapes and sizes and there are at least 5 different forms of business that you can startup as a business owner.

  1. SOLE PROPRIETOR: This is a business owned and operated by an individual. It is actually the simplest form of business entity. The sole proprietor is not a legal entity. The business has no existence separate from the owner who is called Proprietor. A typical sole traders include the one-man type of occupation such as electrician or plumber. Although the term can apply to people who run small, web-based business from home. It is also best for startups. It is the most common and simplest form of business. The sole proprietor is responsible for everything the business does. You trade under your own name with no separate asset and liability.This means that you'll be held personally liable for any debt that the business incurs.

 2. PARTNERSHIP: This is the relationship existing between   two or more persons who join to carry on a business or trade. Each person in the organisation contributes money, property, labour or skills and expects to share in the profits and losses of the business.

This partnership are typically found in professional services such as accountants, lawyers, doctors, dentist etc. where the partners can share expertise and skills. They also can share workload organising work rotate to allow for time off and holiday.Partnership comprise of two or more people and any profit, debts and decision related to the business are shared.

 3. COMPANY: A company is a legal entity made up of an association of persons, be they natural, legal or a mixture of both, for carrying on a commercial or industrial enterprise.

  Companies which are usually owned by shareholders, each put an amount of money into a central pool. This pool of capital is then added to by borrowing and other forms of  finance. Directors run the company on behalf of shareholders who receive a share of the profits. Each shareholder receives a portion (or share) of the company, which is equivalent to what they put in.
    A company is seen as a legal entity that is entirely separate from the shareholder.

 4. FRANCHISE: Franchise is an agreement or license entered by two parties, the franchisor and franchiser. Franchises are licensing arrangement whereby an individual or group can buy the right to trade and produce under a well-known brand in a given locality. It simply means you can use another company's successful business model-and name- to establish your own business. Example an agreement with CNN to use their brand name in a given location.

 5. LIMITED LIABILITY: This is a type of liability that does not exceed the amount invested in a partnership or limited liability company. It is the biggest advantage of investing in publicly listed companies. Limited liabilities benefits professional partners and offers a form of business protection for company's shareholders and some limited partners i.e the maximum sum an individual can lose from a business venture when it goes under, is the sum of money that they invested in the company. 

Now that we know what business is and the forms of business there are, Lets look into "SETTING UP BUSINESS MODEL - FOR STARTUPS"