A guide to different types of business

The definition of business can be described as an organisation which involves the exchange of goods and/or services to consumers for capital. There are many different business types from a sole trader, to a large, international business firm, who all provide different types of products and services depending on their primary business purpose. Read this article to learn more.

Different types of business

A private company limited by shares, is more generally known as a private limited company. This kind of business has shareholders who have limited liability and its shares are not available to the public. If a business was to get into financial difficulty, only the shareholders investments are lost. Shareholders will not lose any personal assets. A private company limited by guarantee is a not for profit organisation. Charities are just one example. These types of business often do not have shareholders, but members who act as the business guarantors. The guarantors contribute a small amount in the event that the company goes into liquidation. In a private unlimited company, creditors cannot take any personal assets from its members or shareholders. A public limited company is a business firm which sells shares to the public and can be listed on the stock exchange, although there is often no requirement for it to be listed. With any form of registered, limited company, it must be registered with the organisation Companies House in the UK.

Sole trader or partnership?

Sole tradership – The most easily set-up type of business and it generally consists of one person. There are however, business risks associated with sole tradership as creditors are allowed to take personal assets from the individual such as property and contents if the company gets into debt. A partnership not dissimilar to sole tradership but there are more people to consider. Any business profits which are made by the partnership are shared between the managers. It is often advisable that if entering a partnership, business owners draw up some form of legal contract, so that if any disputes arise, it is easier to come to a resolution.

Types of employee

There are three types of employee within a business organisation: Workers – a worker is someone who works under contract, with certain entitlements. Employees – This consists of the largest group of people within a workplace. The employee has more rights than a worker and will often have an employment contract usually, but not always in writing. Self-employed – The self-employed are able to choose their service, how it is delivered and how their business is managed. Rights and responsibilities change between different projects and work undertaken in accordance with the client and contracts are drawn up for each new commission.