SMALL BUSINESS - THE MAJOR TYPE OF BUSINESS

What is a Small Business?

A small business is an independently owned and run enterprise with the size of fewer than 500 people. It can be privately held, publicly traded, or non-profit. Some of the most common types of small businesses are a sole proprietorship, partnership, or a limited liability company (LLC).

This article will provide some insight into what makes a small business. At the end we will provide you with three benefits of sole proprietorship and partnerships that are classified as special types of small businesses.

Small businesses have a major impact on the US economy. In total, they employ about half of the United States’ private sector workforce and generate about 60 to 80 percent of the gross national product. Small business owners are often innovators in their industries and in many cases lead the job growth in regions. They also tend to be more adept at creating jobs than bigger companies, even as larger companies are more adept at creating wealth.

Small businesses typically choose one of two types of incorporation: sole proprietorship or partnership (also referred to as a “general partnership”). A sole proprietorship is the easiest and most common way for entrepreneurs to get started. If limited liability companies (LLCs) are reviewed, they should be considered only after the LLC has run its course. You need to know the business registration procedures and requirements. For example, if you are looking at opening a business in Singapore, check out how to register a business name in Singapore.

Sole Proprietorship

Sole proprietorships can be formed by individuals or corporations. In either case, the business is owned by a single individual who is referred to as the “proprietor.” Sole proprietorships are usually formed under state law and do not require any special permission from the state. For example, there are fewer legal requirements to start a sole proprietorship in Oregon than in Massachusetts, which requires that a license or permit be obtained from the Secretary of State’s Office of Professional Regulation before starting a business in Massachusetts.

On the other hand, if a corporation is created to operate as the proprietor’s business, state law may dictate how many shareholders and how many board members are allowed for the corporation. State laws regarding incorporation vary across the country. In most cases, corporations must meet certain requirements in order for their owners to be recognized as “corporate persons” under the law.

Benefits of Sole Proprietorship

• The beauty of a sole proprietorship is that it requires no formation or registration with any particular government agency other than your local government. You do not have to talk to anyone at any point in time until you actually need to file taxes after generating income from the business.
• You’ll experience freedom like never before and will have the luxury of turning your attention to whichever task you please without any of those pesky outside influences.
• Many entrepreneurs enjoy the benefits of being a sole proprietor because it gives them independence and flexibility while allowing them to oversee all business decisions. This makes it a great choice for those who are self-starters and want ultimate control over their business.

Partnership

Partnerships are companies that are owned and operated by more than one person. Partnerships can be formed by people who are jointly operated such as by parents and children (known as a partnership of two), or employees who work together or have some other arrangement (known as an employee-owned company).

Benefits of Partnership

• One or two successful partnerships will improve your chances of success exponentially over a dozen failed ones. This is because their effects can lead to more effective communication and enhanced efficiency as well as increased revenue potential through knowledge sharing, shared costs, brand awareness, and visibility among other things.
• Partnerships are formed as a way to expand on a company's capabilities and increase their opportunities of success. This can come from anything from financial perspectives to marketing and the distribution of products/services.
• Aside from partnerships between companies, personal relationships between partners (such as good friends) also have benefits attached to it. This happens simply because the friendship will help make sure that the partnership is successful and beneficial for both individuals involved.