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Types of Business Models Explained

Any activity performed with the goal of making a profit can be considered a business, including selling items from a car trunk or online. There are three main types of businesses: service businesses like restaurants, manufacturing businesses like plants, and retail businesses like clothing stores. Businesses can also be classified by size, legal structure, and whether they qualify as a small or medium enterprise according to standards that vary by industry. Common business structures in the US include sole proprietorships, partnerships, corporations, S corporations, and limited liability companies.

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Maika J. Pudadera
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7 views1 page

Types of Business Models Explained

Any activity performed with the goal of making a profit can be considered a business, including selling items from a car trunk or online. There are three main types of businesses: service businesses like restaurants, manufacturing businesses like plants, and retail businesses like clothing stores. Businesses can also be classified by size, legal structure, and whether they qualify as a small or medium enterprise according to standards that vary by industry. Common business structures in the US include sole proprietorships, partnerships, corporations, S corporations, and limited liability companies.

Uploaded by

Maika J. Pudadera
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

person or 

corporation is operating a claimed business.3

Any activities performed for profit or in expectation of a profit are considered a


business activity. This includes selling items at a flea market, from the trunk of a
car, or on eBay.

Types of Businesses
There are many types of business models, and businesses commonly operate in
more than one area simultaneously. However, for the sake of generalizing the
categories of business, the three main types are:

 Service, such as restaurants


 Manufacturing, such as industrial plants
 Retail, such as clothing stores

Beyond the type of product or service provided, businesses can also be


classified by their size and legal structure.

In North America, the North American Industry Classification System (NAICS)


sets the standards for which businesses qualify as a small-to-medium-
enterprise (SME). Size standards vary by industry. They may be determined by
the size of the workforce or by the amount of revenue coming into an enterprise.4

In the U.S., the IRS helps define the potential structures someone can choose
while defining their business venture. Here are the most common business
structures.

 Sole proprietorships: These are unincorporated businesses owned and


operated by a single person.5
 Partnerships: This occurs when two or more people share in the funding,
labor, ownership, profits, and losses that come with a business venture.6
 Corporations: These businesses are owned by shareholders and can
become massive enterprises.7
 S corporations: These businesses are similar to corporations, but they're
taxed differently—passing income, losses, deductions, and any other
credits through to shareholders to be taxed at individual rates.8
 Limited liability company (LLC): The rules that govern LLCs vary from
state to state. Depending on where one lives, LLCs may offer favorable tax
treatment or other perks.

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