The Basic Types Of Enterprise Structures

Nowadays, there are lots of businesses out there. They range from small, single owner businesses to large multinational companies. They can have different goals and motives, but all of them can be categorized according to their business structures, with the most common being as follows:

• Sole Proprietorship – The simplest form of businesses is called sole proprietor or single owner businesses. Basically, these businesses have only one owner who is responsible for pretty much everything required for running the business. This means that he owner has to invest, provide assets and capitals to the business by him or herself, although he does have many tax benefits compared to other types of companies. While registration of such businesses is relatively easy, sole proprietorships have a few disadvantages. Of these, the most obvious one is that the owner is liable to use his or her personal belongings to pay off any business debts; properties can also be seized if any legal case is filed against the owner. Taking loans from banks and other institutes can also be a problem.

• General Partnership – A general partnership needs to have two or more people (and preferably less than twenty) to be classified as such. While having slightly higher Hong Kong business registration fees and operating costs than sole proprietorships, general partnerships are the ideal choice for a small group of people who want to start and manage their own business. Any of the partners is capable of making decisions, taking loans and becoming involved in the management process. Again, partnerships have similar tax benefits to sole proprietorships, but liability clauses also apply. There is always a risk of the partners having to use their assets to pay off debts.

• Corporations – Corporations are popular due to a few key reasons, the most prominent one being that they provide their owners with liability protection in case of debts. This means that the business acts as a separate legal identity from that of the owner of owners. By investing capital into the company, it is possible for a person to become a shareholder, effectively being a co-owner in the company. Corporations are often very complex, with a separate board of directors to make decisions and many other employed in various other sectors. While an attractive proposition for a large scale business like an offshore company, corporations are difficult and complex to register and sometimes decision making processes take a long time due to the owners not being in direct control.

• Non-Profit Corporation – Not all businesses are established with a profit motive. An example of this are no not for profits corporations. They can have all kinds of end goals, from fulfilling a certain dream, idea or goal. They mostly tend to be established for the benefit of the public. Charities and fund raising companies are some examples.

• Limited Liability Company – Also known as an LLC, this is a type of business structures which provides the owners the liability protection given by corporations and the tax benefits given by partnerships all in one package. There is no limit to the number of owners or shareholders in such businesses.