A Guide to The 4 Types of Small Businesses

Did you know over 99.9% of businesses in the US are small businesses? These are integral to the American economy, acting as a source of innovation, national prosperity, and economic growth. Small businesses are small scale privately owned setups or corporations that require minimal investment and resources. If you are planning to start one, it is crucial to understand the different types of small businesses to find out what fits your circumstances best.

Small business owner

photo credit: Bruce Mars / Unsplash

The next step would be to hire a B2C marketing agency; these guys can help you effectively launch your product and create a positive image for your small business in the global market. Before you register and establish your small business read this article to help you define the framework and structure of your business model. The following are the different types of small businesses:

1. Sole Proprietorship

A small business with a sole proprietorship is a venture owned by a single individual responsible for all the losses, transactions, debts, and lawsuits associated with the company. These businesses are usually non-registered and unincorporated, meaning they are not legally distinct entities from their owners. The business assets are the same as the owner’s assets, so these sole proprietors file all their business taxes as their personal taxes.

You can consider yourself a sole proprietor if you are a freelance professional like a web designer, copywriter, or consultant managing your business yourself.

2. General Partnership

A general partnership is where two or more owners share a small business. It is similar to a sole proprietorship, as you can file business taxes as personal taxes. The owners can also deduct most business losses from their tax returns. In this partnership, the liability for lawsuits and transactions is shared equally by all owners, but profit and income can vary depending on the partnership agreement, investment, and capital.

General partnership is a convenient business model for partners in the same line of profession, like doctors and attorneys. Having multiple owners also makes applying for and obtaining business loans easier because of several lines of credit.

3. Limited Partnership

Limited partnership small businesses are similar to general partnerships in having several owners. However, while a general partner will share equal liability for business dealings and contribute to the operational tasks, a limited partner only contributes capital to the venture. Due to their limited role in the active running of the business, limited partners may pay less taxes.

Limited partnership allows small companies to attract investors. In a family business, for example, you can designate a general partner and urge other family members to invest in the business as limited partners and watch their assets grow without sharing any liabilities.

4. C-Corporation

If you want to start a venture without being personally liable for the business dealings, A C-corporation is the way to go. A C-corporation is a corporate business structure with one or more owners. The government will tax your business as a separate entity. As a C-corporation, your private assets will not be at stake if your company is sued. The C-corp status of your small business will also make you entitled to fringe benefits like dental, vision, and prescription medical benefits from the business expense without additional taxes.

A C-corporation is not tied to a single owner and will continue to exist as an individual entity even if the shareholders were to pass away. This perpetual existence makes it easier to transfer and share stocks. A C-corp status also makes it simple for you to add employees and subcontractors and ensures steady progress and growth of your small business.


Structuring your business the right way will benefit you for years to come and facilitate the growth of your venture. It is essential to understand your objectives and circumstances carefully before starting your small business and then make an informed choice about the type of business you want to run.

Careful planning will ensure the smooth running and success of your business model.


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