Types of Business Enterprise

Do you want to kick start a new business enterprise and can’t think of which business structure to adopt? If yes, you are not alone. Every startup entrepreneur faces this problem of choice. All it requires is some thought to the types of business enterprise you would start or the sector you fall into and how you plan to enlarge such a business coast.

This tutorial is going to discuss immensely the type of business enterprise, its advantages, and its disadvantages.

Though not limited to these, the following are the main types of business enterprises.

Read Also: Who is An Entrepreneur? Origin, Definition, and Types

  1. Sole Proprietorship

A sole proprietorship type of business enterprise has a well-defined business structure. This type of business enterprise is encouraged where business personal liability is not a major concern.

From a legal perspective, the owner of the business and the proprietorship are one and the same.

It’s Advantages

  1. The sole proprietorship is the easiest business enterprise to set up. It doesn’t require any documentation.
  2. Registration of the proprietorship isn’t required by the State.
  3. The business owner takes total control of the business and finalized all the decisions.
  4. Tax forms are easy, simple, and straightforward.
  5. Liquidation of assets is easy upon the owner’s death.

It’s Disadvantages

  1. The proprietor is exposed to inexhaustible legal liabilities.
  2. A sole proprietorship cannot receive capital from an investor outside his business.
  3. There’s usually a great difficulty in receiving loans from banks.
  4. The business liquidated immediately after the owner passes away.


The partnership forms of business enterprises is another type of business enterprise that opens to an entrepreneur to form his business structure. A partnership is another sole proprietorship enterprise that gives room for the business to house two or more owners at a time.

It’s Advantages

1. A partnership deed is very easy to form.

  1. It housed groups of entrepreneurs with different skills and talents to bear the onus of running the business.
  2. If the deed so agrees, a partnership could keep thriving well, even if one of the partners passes away.

It’s Disadvantages

  1. The partners are open to unlimited liabilities.
  2. There’s usually a conflict of interest in the partnership deed. This could end up being management conflicts.
  3. Although the partners share the profit realize yet some may feel they are not compensated enough for their hard work.

Limited Liability Companies

Another form of business enterprise if you are actually concerned about the unlimited liability that will be open to your business and can’t risk any of your assets in a lawsuit, then the better business enterprise to set up is a limited liability company.

It’s Advantages

  1. The proprietors have limited liability. Their personal assets are shielded from the company debt and protected from judgments.
  2. Owners can decide how the business enterprise settles it tax.
  3. There is room for an unlimited number of shareholders.

It’s Disadvantages

  1. The legal fee and accounting costs are costly compared to proprietorships.
  2. A limited liability company requires documentation of articles of incorporation with the government.


Corporations type of business enterprise has the right to contract, buy, and transact property. It can sue and also be sued by other parties.

Read Also: How to Form a Corporation Full Guide.

It’s Advantages

  1. Corporations attract skillful and talented employees.
  2. It continues to do well, even if separate from its stockholders.

It’s Disadvantages

  1. It’s the most difficult business structure and needs the service of a lawyer, to begin with.
  2. Its profit could result in multiple taxations.


Choosing the type of business enterprise to set up demands some thought about the business structure and the way you want it to grow. If the business involves only you, a sole proprietorship isn’t a bad idea. But, if you are concerned about liability and risking any of your assets, you can consider a limited liability company or a corporation.