If you are running a small business or starting a new venture, you need to decide what ownership suits you the best. Choosing the right ownership will help you run your small business more efficiently. Depending on the ownership, the bank also lends the business loans. If you have successful ownership of the business, the chances of getting a business loan increase. But what are these small ownerships, and what are their types?
Several types of small business ownerships will help you grow and expand your business.
1. Having Sole proprietorship:
A sole proprietorship is the simplest form of ownership business. In this type, the owner of the business is the only proprietor of the company. It’s the easiest form of ownership. In a sole proprietorship, it’s easier to make decisions as only one person is ruling the business. A sole proprietorship is also risky as the burden of liabilities and debts falls on one person.
2. Going for partnership:
If you are going for a partnership with a small business, you have two or more people owning the business. You can also have two or more people making a decision. This type of ownership is great as there is an equal share of liabilities, and you can take risks as the burden of loss will not fall on one person. However, the profits shared are not with one person but with all the partners.
3. Limited partnership liability:
In this type of partnership, the partners are not fully entitled to the liability. They have the flexibility of a partnership. They have full control over the business and can run the way they want.
4. Limited Liability Company:
Similar to Limited Partnership Liability, in LLC, the partners are not fully entitled to the debts. The company has more than one person controlling it. One person does not bear the loss. One member of the firm is not responsible for the conduct of the other person. Here business is a separate entity and does not depend on one person. Any legal problem is on the business and not on one person. The disadvantage is that it is not under the control of one person but a variety of people. One person cannot make the decisions.
5. Cooperative societies:
Cooperative societies are just like joint-stock companies, and they have similar meetings where members come together.
6. Public sectors:
The state owns public sectors. The state or government fully or partially owns this kind of business ownership.
7. Public limited companies:
If you decide to turn your small business into a public limited company, you will need many investors investing in the company. These investors are known as shareholders. They invest in the companies in exchange for the shares. Public limited companies are big, and one person does not bear the profit and liability. It’s a group of people sharing the profits and losses. Investing in a public limited company is open to the public.
8. Private limited firms:
Like public limited companies, private limited firms also have shareholders. These shareholders, however, are not public. In private limited firms, the ownership of the firm is limited to a few selective people. They share the profits, and they also bear losses. They are investors and not public shareholders.
The bottom line
If you wish to run a small business or expand your current business, you must choose appropriate ownership. Choosing the right ownership will help you grow and get you the business loan you are looking for. You can check the business loan calculator at Finserv MARKETS.