12 Types of Businesses

Choosing the right business type and legal structure is an important first step for any entrepreneur. These decisions directly impact everything from daily operations (like managing inventory and scheduling staff) and taxation to personal liability and long-term growth (like attracting investors and securing loans).

Understanding the various options from sole proprietorships and partnerships to LLCs and corporations is the first step toward building a sustainable business. Thorough market research — including analyzing competitor structures and understanding industry best practices — plays a role in determining the best fit for your specific business goals, risk tolerance, and financial circumstances.

In this article, we explore the 12 different types of businesses and break down each type and structure so that you can decide which one is right for you.

• Common business types
• Business structures and legal entities
• Key takeaways

These are general business categories based on operations and industry.

This type of business provides services, focusing on the customer experience rather than on the sale of physical goods. Some examples include:

• Consulting
• Salons
• Repair services
• Transportation
• Hospitality (such as restaurants, hotels, and lodging)

This type of business sells physical or digital products, often using a hybrid model of online and physical stores. Some examples include:

• Ecommerce
• Retail stores
• Manufacturing

Online businesses primarily sell their goods and services through the internet, generating revenue by selling products directly through their website. Some examples include:

• SaaS
• Drop shipping
• Blogging
• Affiliate marketing

Businesses in the digital economy enjoy numerous benefits, from reaching a global audience and streamlining operations to reducing costs. AI for small business, along with automation and data analytics, further empowers organizations to refine their offerings and integrate technology throughout their operations.

Online and digital businesses offer invaluable growth potential by:

• Enabling brands to access a global customer base without geographical limitations
• Providing omni-channel marketing opportunities — powered by small business marketing software — that reach customers more efficiently
• Allowing companies to gather valuable customer data that can shape the creation of personalized experiences and effective strategies
• Enabling brands to quickly adapt to new technologies and market trends
• Facilitating the easy and more cost-effective expansion of operations to meet growing demand
• Empowering companies to build strong relationships through interactive platforms and personalized communication

However, there are some potential challenges of online and digital businesses that you should be aware of before starting your own.

• Cybersecurity threats can compromise the security of data.
• High competition in the market requires standing out in a crowded digital marketplace by executing effective brand strategies, differentiating your product or service through innovative features, and offering exceptional customer service. Check out our small business sales software and learn how you can streamline the sales process and remain competitive in the market.
• Attracting new customers and keeping them loyal require innovative and creative marketing strategies that increase engagement and retention. CRM for startups can help you capture leads, streamline your processes, find new insights, and deepen your relationships with customers.

“Brick-and-mortar” is the term used to describe businesses with a physical location in a building or structure where they sell their products or services to customers face to face. This also includes businesses that own or lease retail shops, factory production facilities, or warehouses for operations.

Brick-and-mortar stores aren't going anywhere. They offer something online shopping can't: real-world experiences, brand visibility, and a sense of community. By offering omni-channel options such as online ordering and in-store pickup, they cater to a wider range of customer needs, increasing sales and building loyalty through convenience and personalized service.

Some examples include:

• Restaurants
• Retail stores
• Gyms
• Grocery stores
• Coffee Shops

This is a type of business model in which a company (the franchisor) allows individuals (franchisees) to operate a business using the franchisor’s brand, trademarks, and business model, in exchange for a fee. Essentially, the franchisor gives the franchisee the right to sell the company’s products and services under the established name and reputation. Franchise businesses enable rapid expansion, but the high initial cost, ongoing franchise fees, and limited creativity and control are disadvantages to be aware of.

Some examples of popular franchises are:

• McDonald’s
• Starbucks
• Baskin-Robbins
• Dominos
• Anytime Fitness
• Hilton Worldwide hospitality company
• RE/MAX

These businesses charge a recurring fee for consumer access to their products or services. Subscription-based businesses offer a variety of benefits including selling digital or physical products, creating a steady stream of revenue, and offering convenience to customers by simplifying the process of reordering products that need to be replenished.

Some examples include:

• Streaming services: Such as Netflix or Hulu.
• Software companies: Such as Adobe or Microsoft.
• Subscription boxes: Such as Barkbox, Blue Apron, and Dollar Shave Club.

Choosing the right business structure is a key decision. It has a big impact on your taxes, funding options, and how your business operates. It also defines ownership, profit sharing, and responsibilities, while protecting your assets and ensuring you comply with regulations.

This section provides the information you need to choose the right structure for your business.

Sole proprietorships offer the simplest and most affordable business structure, with minimal legal red tape. However, this simplicity comes at a cost; because the business isn't a separate legal entity, the owner has unlimited liability and receives the fewest protections. This direct connection to the business, though, can be a strength.

According to the 6th Edition of the Salesforce Small and Medium Business Trends Report, 61% of customers feel like just a number to most companies. As a small or medium-sized business (SMB) — and particularly as a sole proprietor – you have the opportunity to treat every customer as an individual, building personal relationships and fostering loyalty.

Here are the pros and cons of a sole proprietorship.

This business structure is ideal for freelancers such as photographers or landscapers, online store owners, personal trainers, consultants, and anyone exploring a side hustle or unsure if their new venture will become a full-time commitment.

When two or more individuals come together to own a business, they form a partnership.

This is the simplest way to establish a company with multiple owners, allowing for shared profits, responsibilities, and liabilities while providing a collaborative approach to business operations.

Partnerships, like sole proprietorships, are easy and affordable to establish because they don't require a separate legal entity. And, they can take advantage of flow-through taxes, meaning all income from the business is distributed among the partners and taxed at the individual level. There are different types of partnerships, which makes this business structure multifaceted.

Choose your partners wisely! Be sure to create an agreement among your partners that clearly outlines roles, responsibilities, and profit-sharing formulas. Depending on which type of partnership you agreed on, you might be liable for your partners’ debts or legal problems.

LLCs combine the liability protection of corporations with the tax advantages and flexibility of partnerships. While LLCs are separate legal entities, shielding owners from personal liability, they also offer pass-through taxation, avoiding the need for separate business tax filings. However, forming an LLC requires filing articles of incorporation and appointing a registered agent.

These types of businesses do not offer stocks for employees or outside investors. If someone is looking to be more involved in the company, they need an ownership stake in the company. Once they have invested in the company, they can either manage the day-to-day business operations, or they can act similarly to a corporate board of directors overseeing the company.

A corporation is a legal entity that exists separately from the owners. It conducts its own business, and holds its assets, while the owners have limited liability for the company’s debts and actions.

Corporations also have corporate governance structures, which include boards of directors and officers. This structure of business is more difficult to establish, as it also requires articles of incorporation, as well as information on shares, the name and location of the business, and a statement of purpose.

Co-op is technically a corporation but it’s owned by its employees, customers, or both. It is taxed on the individual level similar to S-corp, partnerships, and sole proprietorships. There are no shareholders or stockholders, and no one owner has a significant stake in the organization. Each member has an equal say, and are all invested in the success of the company.

However, because of the amount of people involved in operations, decision-making can be slow, and agreeing can be difficult. Cash flow issues may also present themselves when the business wants to grow, especially because banks and venture capital are harder to acquire with this type of business.

Some examples of this type of business include:

• REI
• Cooperative Home Care Associates
• Land O’Lakes
• Tillamook County Creamery
• Sunkist

Nonprofits are technically considered corporations because they’re required to file articles of incorporation with the state they are registering in, but they have little in common with the average company.

Nonprofits don’t have shareholders or dividends; instead they invest all profits back into the organization. They must satisfy a certain number of criteria to meet the nonprofit status, but once they do, they receive tax-exempt benefits and can seek grants and other donations to meet funding needs.

Salesforce works with a lot of nonprofits and charitable organizations. And with the right help, and the right tools, you can run your own if you were so inclined.

Whether you’re launching a service-based venture, looking to incorporate an online and digital business into your already existing brick-and-mortar, establishing a corporation, or creating a nonprofit, your decision will impact every facet of the operation.

It's important to consider the advantages and disadvantages of each option before choosing a type or structure because it will significantly impact your business operations and long-term success. For personalized guidance, check out our guide on how to start a business, and explore our essential small business tools that will help you improve business operations. Once you have decided on your business structure, consider using our small business marketing strategies to fine-tune your campaigns, and target paying customers.

By taking the right steps now, you can build a strong, scalable business that meets your vision and thrives in a competitive market.

Start your journey with a free trial of {product.starter} today. Looking for more customization? Explore Pro Suite. Already a Salesforce customer? Activate Foundations for free.

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