You are studying the characteristics of types of businesses so that you can make the decision to choose the right type for you. The selection of the appropriate type of enterprise should be based on business objectives, size, finance and legal requirements. Understanding the characteristics of each type will help you make smart decisions and provide a foundation for the sustainable growth of your business. If you are wondering, read the article below now for the necessary information.

1. What is business? Characteristics of types of businesses

An enterprise is interpreted as a business organization that conducts trading, exchange and transaction activities. To be considered an enterprise, one’s own name, assets, and operational headquarters are required. Registration in accordance with law and permission to operate is a necessary condition for an enterprise to operate.

Business activities of an enterprise may involve one, some or all stages of the investment process, from production to production or service consumption, for the purpose of generating profits.

The highest goal of an enterprise is to make a profit for the owner. However, there are also a number of enterprises that operate for a purpose other than profit alone.

People should look carefully at the characteristics of the types of enterprises below and then make a decision on what type of enterprise to establish a company.

What benefits does business bring to society?

Here are some of the benefits that can be addressed:

• Enterprises are an integral part of socio-economic development, making an important contribution to the development of the country.
• Enterprises provide products and services to people at an appropriate price to meet the needs of customers.
• Enterprises create employment opportunities, help solve unemployment problems and provide income to society.
• Enterprises promote competition, provide incentives to improve the quality of products and services, and help lower prices.
• Enterprises play an important role in research and development, creating new and improved products, meeting the needs and life of society.
• Enterprises contribute taxes and contribute to the supplementation of revenue to the state, which plays an important role in the division of the community and national support in the provision of public services and economic development.

2. Enterprise classification

When classifying businesses, we use various criteria to create various types based on those criteria. Consider the following two criteria and apply them to the business classification:

2.1 Classification by legal form of enterprise

An enterprise can be classified according to the legal form in which it was established and operated. Common legal forms include:

• Company: Including Limited Liability, Joint Stock Company, Partnership Company, etc. The company is a business entity with separate legal rights and legal responsibilities independent of individuals or member organizations.
• Individual enterprise: A form of enterprise owned and operated by an individual. The owner is responsible for the assets and business of the enterprise.
• Non-profit organizations: Organizations operating not for profit, but often towards social, cultural, educational, philanthropic, etc. These organizations often do not share profits among their members.

2.2 Categorization by property ownership in an enterprise

An enterprise can be classified based on its ownership and management of assets. The main categories include:

• Private Enterprise: The assets of an enterprise are owned and managed by an individual.
• Public Enterprise: The assets of the enterprise are owned and managed by public organizations, public agencies, or the government.
• Cooperative Enterprise: The assets of an enterprise owned and managed jointly by its members are individuals, organizations, or companies.
• Foreign enterprises: The assets of the enterprise are owned and managed by foreign investors, organizations or multinational companies.

Note: the above classification list is general only, and there may be other legal and classification forms depending on the regulations.

3. Private enterprise

A private enterprise is a type of enterprise in which an individual owns and manages assets and business activities. This means that the owner of a private enterprise has control and decision on the business activities of the company.

The owner of a private enterprise may be a single individual, founder and operator of the enterprise, or may be an individual representing a family or group of related persons. The financial and legal responsibilities of private enterprises are within the scope and responsibilities of the owner.

An important feature of private enterprise is the flexibility and speed of decision-making, as power and decision-making are concentrated in the hands of an individual. This makes the business management and operation process more flexible and can respond quickly to changing situations and new opportunities.

However, private firms also have weaknesses such as capital and resource constraints compared to larger firms. In addition, dependence on an individual can create risks related to health, power and personal relevance in the process of managing and developing the business.

Private firms can operate in a wide range of industries and sizes, from small stores, manufacturing facilities, services, to large private national companies. For an individual who wants to run his own business and ensure control and autonomy in business decisions, private enterprise is a popular and attractive option.

4. Partnership company

A partnership is a legal form of an enterprise in which two or more individuals or organizations work together to build and run the enterprise. Responsibilities and benefits are shared among partners at the rate agreed in the partnership agreement.

Partners in the partnership may contribute capital, labour, skills, or other assets to the enterprise. The partnership has separate legal rights and is legally responsible independently of individual members or member organizations.

The partnership can operate in a wide range of fields and sizes, from small businesses with a few simple partnerships, to large companies with many members and complex structures.

5. Joint-stock company

A corporation is a legal form of an enterprise in which its capital is divided into so-called shares. Shareholders who own shares of the company are responsible for their financial obligations only within their capital contribution.

Shareholding companies have separate legal rights and are legally responsible independently of individual shareholders. Shares of the company may be purchased, sold or transferred in accordance with laws and company charter.

Joint-stock companies can be listed on the stock exchange to attract investment and provide investors with opportunities to buy and sell company shares on the stock market.

Joint-stock companies usually have a board of directors and a board of directors to manage and operate the company. Important decisions of the company are made during general shareholders’ meetings.

6. Limited liability company

Limited Liability Company (LLC) is a legal form of enterprise, in which members’ responsibilities are limited to the extent of their capital contribution in the company. Limited liability companies have separate legal rights and are legally responsible independently of individual members.

6.1 Characteristics of a One-member Limited Liability Company

One member Limited Liability Company is commonly referred to as the “Single-Member Limited Liability Company.” Characteristics of a one-member limited liability company include:

• There is only one member in the company.
• The sole member is responsible for the financial obligations of the company only within his capital contribution.
• The sole member shall have control and decision on the activities of the company.
• A one-member limited liability company may be established to protect an individual’s assets and business activities.

6.2 Characteristics of a Limited Liability Company with two or more members

A limited liability company with two or more members is called a “Multi-Member Limited Liability Company.” Characteristics of a multi-member limited liability company include:

• There are two or more members involved in the company.
• The liability of partners is limited to the amount of capital contributed by each partner.
• Members are legally and financially responsible for the proportion of their capital contribution.
• Rights and responsibilities of partners are stipulated in the company charter.
• A multi-member limited liability company may be established to do business jointly and to share responsibilities and interests among its members.

Once you have chosen the right type of business, you should learn more about the know-how of successful business to partly help your business grow.

7. What kind of businesses should be chosen?

In my opinion, it is advisable to choose the type of private enterprise. A private enterprise is an enterprise owned by an individual, in which the sole proprietor is responsible for all activities of the enterprise.

• Advantages: Private entrepreneurs have the right to make maximum decisions on their business activities and to use profits after fulfilling their financial obligations.
• Disadvantages: This type does not have legal status, which means that you will be unlimitedly responsible not only for the assets of your business but also for all your personal assets for the financial obligations of your business.

However, choosing the type of business depends on your specific situation and business goals. Before making a final decision, consult a legal expert or business consultant to ensure that the decision is appropriate for your situation and interests.

In short, given the characteristics of types of businesses, private enterprises provide high control but are responsible indefinitely. Partnerships and joint-stock companies are suitable for large scale and attract investment. A limited liability company may be one or more members. The selection of the appropriate type of enterprise should be based on business objectives and financial situation. You can contact Viet My Law and Accounting for completely free advice on how to service.