Classifications

Classifications of Business

There are many types of businesses, and because of this, businesses are classified in many ways. One of the most common focuses on the primary profit-generating activities of a business:

• Agriculture and mining businesses are concerned with the production of raw material, such as plants or minerals.
• Financial businesses include banks and other companies that generate profit through investment and management of capital.
• Information businesses generate profits primarily from the resale of intellectual property and include movie studios, publishers and packaged software companies.
• Manufacturers produce products, from raw materials or component parts, which they then sell at a profit. Companies that make physical goods, such as cars or pipes, are considered manufacturers.
• Real estate businesses generate profit from the selling, renting, and development of properties, homes, and buildings.
• Retailers and Distributors act as middle-men in getting goods produced by manufacturers to the intended consumer, generating a profit as a result of providing sales or distribution services. Most consumer-oriented stores and catalogue companies are distributors or retailers. See also: Franchising
• Service businesses offer intangible goods or services and typically generate a profit by charging for labor or other services provided to government, other businesses, or consumers. Organizations ranging from house decorators to consulting firms, restaurants, and even entertainers are types of service businesses.
• Transportation businesses deliver goods and individuals from location to location, generating a profit on the transportation costs
• Utilities produce public services, such as heat, electricity, or sewage treatment, and are usually government chartered.

There are many other divisions and subdivisions of businesses. The authoritative list of business types for North America is generally considered to be the North American Industry Classification System, or NAICS. The equivalent European Union list is the NACE.

Basic forms of ownership

Basic forms of ownership

Although forms of business ownership vary by jurisdiction, there are several common forms:

• Sole proprietorship: A sole proprietorship is a business owned by one person. The owner may operate on his or her own or may employ others. The owner of the business has unlimited liability of the debts incurred by the business.
• Partnership: A form of business owned by two or more people. In most forms of partnerships, each partner has unlimited liability of the debts incurred by the business. There are three typical classifications of partnerships: general partnerships, limited partnerships, and limited liability partnerships.
• Corporation: A limited liability entity that has a separate legal personality from its members. Corporations can be either privately-owned or government-owned, and can be organized as either for-profit or not-for-profit. A privately-owned corporation is owned by private individuals while a public corporation is owned by multiple shareholders and is overseen by a board of directors, which hires the business's managerial staff.
• Cooperative: Often referred to as a "co-op", a cooperative is a limited liability entity that can organize for-profit or not-for-profit. A for-profit cooperative differs from a for-profit corporation in that it has members, as opposed to shareholders, who share decision-making authority. Cooperatives are typically classified as either consumer cooperatives or worker cooperatives. Cooperatives are fundamental to the ideology of economic democracy.