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Different Business Models: A Short Guide for New Entrepreneurs


2021-08-08


Sole Trader

 

 

A sole trader is the most basic type of business structure, and it is relatively straightforward and inexpensive to establish. The major advantage of starting a sole proprietorship company is that you will be legally accountable for all elements of your business as a lone trader.

You'll typically make all of the choices regarding how to start and operate your firm but if anything goes wrong you’ll be held accountable which is the biggest drawback of becoming a sole trader.

Partnerships

 

 

A partnership is a firm that is held by two or more persons. Partnerships, like sole proprietorships, can benefit from flow-through taxation. This means that the income is taxed just once because it is considered as the income of the owners. Partnerships, in general, offer more flexibility than other forms of enterprises, but they also expose you to more risk.

Limited by Shares

 

 

A limited by shares as the name suggests is an entity that has limited liability, which implies that shareholders/guarantors' own finances/assets are safeguarded in addition to their investment to the firm. Limited liabilities provide the impression of professionalism and trustworthiness. Ultimately, this results in them to appeal to a broader spectrum of potential customers.

Limited by Guarantee

 

 

Non-profit organizations, such as sports clubs, workers' cooperatives, and membership organizations, frequently incorporate limited by guarantee corporations in order to benefit from restricted financial responsibility.

A limited by guarantee entity offers numerous benefits such having different legal identity from their members, authority to acquire and sell property on behalf of the organization, and have the ability to file or defend legal actions in their own name.

Which One Suits Your Business?

 

 

Now, if you’re wondering which one suits your business idea, first you need to properly define your business in terms of scalability potential, goals, target audience, and investment needed. Determining these factors will give you an idea as to which business model suits your business idea. Hence, allowing you to make the right decision when starting your own company.