Types of Businesses and Factors to Consider When Starting a Business - Assignment Example

Introduction

This work seeks to examine different types of businesses and to explore how the formation of a particular type of business is organised. The task will revolve around the business formation, ownership, management and any other antidote that informs its wellness in operational growth and service dispensation (Hair et al. 2015, 7). For instance, this analysis acknowledges the entrepreneurial skills that are required to come up with a business idea, which stipulates an entrepreneur as an individual who sees a business gap and feels it. In other words, business success depends on the innovative skills of the person or people involved for the better results of its undertakings. Inherently, every type of business has a special structure that dictates how it operates.

Q 1

Different Types of Businesses

There are different types ideas that an individual entrepreneur must take into account before settling down to start the business, one of them is the type of the business he or she wishes to engage in(Hofer 2007, 10). For example, he or she must think and decide whether he or she feels to do the business alone (own business), with partners or with associates. In this precept, the business may be either a sole proprietorship, partnership, or a corporation

Sole Proprietorship

This is a type of business, which is owned by one person (Hertz, Beasley and White. 2015, 84). As the name suggests, the owner is solely responsible for the business formation, management and decisions. In other words, the owner is responsible for all the debts and the losses that the business makes, and uses his or her name in entering into the business deals.He makes all the decisions concerning the way the business should operate with few legal procedures involved in starting and operating the business. Furthermore, sole proprietorship has certain advantages and disadvantages that the owner experiences while doing the business. For example, some of the advantages include management, where the owner is the own boss who makes all the decisions without having to consult anyone. He or she may decide to incorporate the family members to help in the operations, or even hire some staff to help, but all these people work under the whims of the owner.

On the other hand, the cost of starting the business is low compared to other types of businesses due to few legal procedures involved. The owner only needs to register the business on his or her name without having to get involved in many steps to get the licence of operation (Boyle and Magor 2008, 127). In addition, the starting capital is low compared to other types of businesses, making it easier to start. Finally, the owner enjoys all the returns, meaning that all the profits that come from the business go to his personal account without having to share it with someone. However, there are disadvantages that the owner must be ready to meet while doing his or her business. For example, the owner faces the business liabilities alone, such that if the business has any debt then his personal property would be auctioned to settle the same. In addition, the business is more contingent to the owner, such that if he or she is not available then the business cannot continue or rather collapse. For these understandings, sole proprietorship has both the good ends and setbacks that an individual must construe before making the final decision to go for it.

Partnership

A partnership is a business that is started by partners who have a mutual agreement to start a business (Hertz, Beasley and White. 2015, 85). The partners share the capital and any other resources that are necessary to start the business, meaning that they share the idea and the responsibility of starting the business. Likewise, the partners share the profit in an equal measures or dependent on how they agree depending on their capital contribution. In partnership, there is ether limited or general partners. Limited partners are those partners whose presence or contribution in the business management is limited in that they do not take active role in management. General partners are those that engage in active issues of the business. They participate on the day-to-day operations of the business. Formation of the partnership business requires the writing of the partnership agreement that is overseen by a lawyer for security purposes. The agreement states the method of capital contribution, sharing of the profit and sharing of the liabilities and assets of the business. It also outlines how the business can be dissolved and reasons for such dissolutions.

Corporation

Corporation is a type of business that is formed by members in a public forum, though some can be called private. The main difference between corporation and the other two (partnership and sole proprietorship) is that the business remains a separate legal entity from the owners, meaning that it can enter into the business contract on its own name. For instance, the business can sue and be sued in the court of law without having to engage the members (Hertz, Beasley and White. 2015, 88). What this means is that owners have limited liability and cannot be called upon to respond to the questions about the business. In this precept, the business has various legal procedures that must be followed for its formation. For example, certificate of corporation must be acquired from the government authority before the business starts operations. Also, its books of accounts must be inspected regularly since it contains the public interests who are the shareholders that must be protected. The types of business in this line include public limited companies, private limited company and government parastatals.

Besides, the business capital is realised through the sales of shares and debentures, where shares become the owners of the company while the debenture holders remain creditors to the company. Some of the advantages of corporations are that the capital contribution is shared among the members making it not to remain a total load to one person like in the case in sole proprietorship. In addition, the death of one member does not interfere with the life of the business like in the case of sole proprietor and partnership. However, the disadvantages include the numerous legal procedures that are required for individuals to begin a corporate business. There are possible conflict between the shareholders and the directors in case the business makes any loss.

Q 2

Factors to Consider When Starting a Business

An entrepreneur must put into consideration before engaging in any business activities numerous factors. According Dragon’s Den business success stories, the company that does thorough research on these factors achieve the best as opposed to many companies in the United Kingdome that start business without having to do thorough investigation on the same (Caan 2009, 5).As a result, they must engage its quality time in analysing these factors to have an informed decision about the business, which is so crucial for any business activity. They include the following:

Risks

He or she must consider the risk factors of the business that he or she intends to start (Rothaermel 2015, 11). For example, he or she must look at the losses and damages that he or she may realise while operating the business. For instance, some businesses are so engaging that the business owners spend some extra income in maintaining the business in order for it to grow. In addition, he must consider the security in the region that the business is to be stationed or operated. This includes the market security, physical security and the production security. The market security implies that all the products released into the market will attract the customers interests of which contrary would harm the business. Physical security implies that pests and ill-minded people cannot break into the business premises to interfere or destroy the property of the business. Production security includes issues like the supply of raw materials and other important necessities that the business needs to thrive.

Finance

Finance is a very fundamental factor to consider in any business idea since it is the backbone of any business. The financial situation of the entrepreneur determines the type of business that he or she would go for (Rothaermel 2015, 12). Some business requires huge capitals to start while others are not so vast in the initial capital needed. Therefore, the entrepreneur should measure his or her financial strength before settling down to do any business.

Product or Service

The type of the product that an individual intends to offer is an important factor to consider since it dictates the type and location of the business. For example, business that deals with the perishable products must be located in an area with the market access so they they are reached to the consumers before they go bad (Rothaermel 2015, 12). On the other hand, manufacturing enterprises must be located in an area that can easily access the source of raw materials. Furthermore, nature of the business or a service also informs the type of service. For instance, there are certain types of services that cannot be left in the hands of the private sectors such as infrastructural businesses. In this standpoint, an individual company cannot be given the sole authority to offer electricity in the country due to huge capital needed to start such activity.

Conclusion

An individual entrepreneur must take into account several factors before settling down to start the business, one of them is the type of the business he or she wishes to engage in. For example, he or she must think and decide whether he or she feels to do the business alone, with partners or with associates. He or she must consider risk factors, financial and product or service factors. For example, the financial situation of the entrepreneur determines the type of business that he or she would go for. Some business requires huge capitals to start while others are not so vast in the initial capital needed. In addition, he or she must look at the losses and damages that he or she may realise while operating the business.

Reference List

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rise of the entrepreneur. International Journal of Media & Cultural Politics, 4(2), pp.125-144.

Caan, J., 2009. The real deal: my story from Brick Lane to Dragons' Den. Random House.

Hair Jr, Joseph F., et al. 2015.Essentials of business research methods. Routledge

Hertz, Giles T., Fred Beasley, and Rebecca J. White. 2015. "Selecting a Legal Structure:

Revisiting the strategic issues and views of small and micro business owners." Journal of Small Business Strategy 20.1: 81-102.

Hofer, M.B., 2007. Business success in China. Springer.

Rothaermel, Frank T. 2015.Strategic management. McGraw-Hill.