Contrary to popular belief, almost any business can be put under one of the below mentioned six kinds of businesses based on the nature of the business.
Firstly we have the sole trader. This kind of business is the most common and the most ancient. It is a one man job and everything is up to you. A sole trader can also be called a proprietor and he makes all the decisions. This form of business is manifested through shops and salons or spas. Your gardener, beautician and even a painter-they are all sole traders. A sole trader funds his own business and reaps the benefits. There is no one else involved to share the profit or the loss. A sole trader might expand his business and therein change into one of the other kinds of businesses.
This brings us to partnerships. As the name suggests, there should be a minimum of two people involved. This means that the decision making, profits and investments are all shared and divided amongst the partners. Doctors work in partnership. Small businesses might also start out as partnerships.
A partnership can grow to become a company. Technically, it should be called a joint stock company. The reality behind the technical jargon is that a collection of people decide to contribute their earning or savings as an investment for a business startup. It is one of the most common kinds of businesses. The share of profits is decided by the percentage of investment made by every stock holder. A company is always seen as a single monolithic entity. It is responsible for its employees as well as its clients. When it goes into liquidation it means that it is bankrupt.
A type of company is the private limited company. Most kinds of businesses that are small scale are most probably private limited. This means that the shares are available to private members of a unit, like a family. This would also imply that the shares are not up for buying by the general public and do not make an appearance in the stock market.
The opposite of all private kinds of businesses is the public limited companies. These companies are more large scale. To be called a public limited company, the organisation must have multiple directors and a trading certificate issued by the authorities, like the Companies House. Their shares are available on the stock market and anyone can buy them. This makes the company liable for audits and it must keep all its records in the open.
Franchises are those kinds of businesses wherein you replicate your shop or company on an already successful model. You use the brand name of your franchise to speak for your shop or caf