5 type of business, forms and classifications of business

I smell something big as you’re looking for type of business, which means you’re about to start a business.

Entrepreneurs like you are empower the economy.

Starting a business is serious matter. To identify the right type of business or forms of business is another thing.

type of business

If you’re truly looking for type of business or forms of business, you’re in the right place.

In this article I will share with you a list of business type, forms, classifications and their meanings.

Are you ready?

Let’s begin….

Here’re 5 type of business

  1. Manufacturing business
  2. Wholesale business
  3. Retailing business
  4. Services business
  5. Transactions and distribution business.

Those are the type of business.

How does this list come about? It’s base on difference business activities. So let’s take a look at them one after the order.

1. Manufacturing business: This is the class of business that buy raw materials and components and by process them, convert them into an assembled tangible products.

Manufacturing business is the type of business that requires enough capital capital and resources.

Manufacturing business account for less than 10% of business in Nigeria.

As the results of the poor power supply and other relevant social amenities.

This is classifications of business are into products and construction. They convert raw materials into finishing goods.

The good example of manufacturing business is factories. It’s not a friendly business for entrepreneur with lean pocket.

Requirements to start a manufacturing business

✓ It requires a high capital outlay and high risk of investment.

✓ It’s requires machines to get started

✓ Access to to raw materials

✓ constant power supply

✓ Access to market and human resources.

The requirements are depends on the size of your business.

Example of manufacturing companies are; apple inc, coca cola etc

2. Wholesale business: wholesaler are the middleman who move the finished goods from the manufacturer to the retailers.

Wholesaler act as the intermediaries between manufacturer and retailers or between manufacturer and industrial product users.

They perform a number of key functions in making the efficiency of the system of the product distribution.

These functions are:

Storage, also referred to as warehousing: The wholesalers serve to relif manufacturers and retailers of storage and related cost.

Breaking bulk: They take goods in large quantities from manufacturers and then breakdown the bulk of goods to small manageable qualities for the retailers to handle-stock and then sell to the final consumers.

➡ Stock-holding: The large stock always held by wholesalers. They help to reduce delivery time to retailers and reduce the risk of running out of products by retailers.

➡ Delivery service: The manufacturers usually deliver products to a single or new number of wholesalers.

And the wholesalers deliver to multiple small retailers.

Promoting: The wholesalers introduce the products, explaining the qualities and uses, even persuading the consumers through the retailer to buy such products.

3. Retailing business: This type of business specializes displaying larger numbers of goods and make easy for consumers to buy.

type of business5 type of business, forms and classifications of business

Retailing is selling of goods and services to the final consumers or end users.

Type of retailing business

  1. Independent shops (own by sole trader)
  2. Market stall
  3. Chain stores ( own by large company in towns or cities within a country)
  4. Supermarket (large shops selling a wide range of goods)
  5. Hyper market (very large shop located on the out-sketch of towns and selling very wide range of goods)
  6. Department store (shops broken into distinct departments, usually located in a city centre).

4. Services business: This is a type of business that offer technical services to consumers.

You offer your service(s) to costumers in exchange of money.

Example of service business are advertising agency, freelancer, etc.

5. Transaction and distribution business: Transport and distribution business is the movement of goods and services from the manufacturers to the end users.

This simply means you invest in transition services by buying cars, or trucks or vans for the purpose of moving people or goods from one location to another.

Good example of transportation companies here in Nigeria are: chisco motor, Benue links and God is good motor.

Note: Before starting a business you need to invest on type of business you can run effectively.

8 forms of business organizations

This are 8 popular forms of business organizations under private enterprise as follows:

1. Sole proprietorship: The sole proprietorship is form of business organization that is conceived, established, developed, controlled and managed by an entrepreneur who is the owner-manager of the business.

Sole proprietorship is traditionally the original manifestation of entrepreneurship.

It’s often called a one man business considering the owner manager nature of the business.

The liability of the sole proprietor is unlimited, in the event of business failure indeptedness or liquidation, sole proprietor will have to play the entire debts of the business , even if it requires him/her personal properties in so doing.

The principle of unlimited liability stern from the fact the sole proprietor is not a separated legal entity from his/her business.

2. Partnership: A partnership may be defined as a form of business organization that is brought into being as a result of two or more persons who have agreed to combine their resources with a view to carrying on a venture with profit motive.

Partnership is a relationship which subsist between person carrying on a business in common with a view to make profits.

They put their resources together for the purpose of doing business.

Partnership is guide by a statutory regulation known as a partnership deed, which is written agreement that spells out how the partnership should be governed.

3. Joint stock company: A joint stock company is defined as the an association of person formed for the purpose of an undertaking or business carried on in the name of the association.

When a company is formed, it’s regarded as an artificial person recognized by the law as having rights and liabilities to those of a real person.

Joint venture company is usually regarded as the most important form of business organization; is the greatest innovation in business which has made it possible the rapid extension with a minimum risk.

4. Co-operative: A co-operative is an association of persons who are voluntarily to joined together in order to achieve a common end through the formation of democratically controlled organization, making equitable contributions to the capital required and accepting a fair share of risk and benefits of the undertaking in which the members actively participate.

The first cooperative was started in Rochale city of England in 1844 by twenty-eight artisans (Weaver) called the “Rochale pioneers”.

5. Joint ventures: Joint ventures is an agreement between two or more business concern, usually corporations, for the joint productions of goods and services.

Each party to the joint venture agreement usually supplies investment capital and management or maketing skills required.

Rachman and mescon (1985), a joint venture is a company established for the co-operation of two or more companies in accomplishing a specific task.

Joint ventures are generally not permanent and this feature differentiates them from the normal partnership business.

6. Franchise: This forms of business organization that is legal business contract which binds franchisee and franchiser.

A franchise arrangements and contract terms usually provide acceptable terms, such as:

➡ The franchise pays a proportion of the set up cost of the franchise purchase of the shop site, it’s fixture and benefiting.

➡ The franchisee pays a proportion of the annual profits it the franchiser.

➡ The franchisee must provide a standard of product or service which is expected by the franchiser.

➡ The franchiser provides advertising and promotion on local or national scale as applicable.

➡ The franchiser agree not to open further franchises within a specified territory or radius of an existing franchise.

Perfect example of franchise are distributors.

7. Syndicate: Is a group of people or companies who join together in order to achieve a particular aim.

It’s a temporary association of two or more firms usually for mutual investment.

Syndicate formation is common feature in the banking industry where they are formed in order to enable the banks share the risk of a particular large loan request.

In features, the syndicate hires no permanent workers, does not maintain known office and remain dissolve soon as it’s aim is been obtained.

8. Non profit organization: This forms of business is the easiest one to start. This the type of business organization the owners yien to make profits.

To know more about non profit business organization you can do that at fits small business, fits small business, they have in-depth explaination of non profit organization on their website.

Classifications of business

Business are classified into two, they are:

1. Private business: This forms of business is form by individual or group of individuals for profits purpose. It’s totally own by an entrepreneur and manage by him/her.

2. Public business: This classifications of business are owned by government or communities.

Where the profit is expressed in the forms of social benefits, citizens enjoy through the utilization of social services and amenities provided by the government, rather than economic benefits.

Reference

A.c woodney, c.a. young, e.a ogoh (2013) Entrepreneurship education in  Nigeria

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3 Replies to “5 type of business, forms and classifications of business”

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