Small Business Company

Legal definition of a Small Business Company varies from country to country and from industry to industry. Generally, a Small Business Company is that company which employs small number of workers and run on a low budget. A Small Business company enjoys a number of advantages. Small Business Enterprises have less risk associated with them and management of the business activities is also an easy task. Loans for setting up a Small Business Company can be arranged easily and recovery from loss is also much easier than the large business houses.

Small Business Companies can have different business structures. Selection of business structure is the most important decision to be taken by the owner of the small business. Because the tax payments, process of fund raising, amount of paperwork everything is different for different business structures. A Small Business Company can adopt the following structures:

Sole Proprietorship

In Sole Proprietorship, one person is sole owner of the small business company. This is the most common form of business structures as it is the easiest and quickest way of forming a small business enterprise. Securing a license for the business and a permit for the place of business completes the formalities of starting a sole proprietorship company.

In this kind of small business company, total management control is in the hands of the sole proprietor and the total liability is on his shoulders.

General Partnership

In general partnership structure two or more persons are in charge of the business. They are jointly involved in the operations, management and decision-making of the small business company. In this case, a formal partnership statement is signed among the partners, which clearly states the responsibilities, tasks, liability share and profit share of each partner. In this general partnership small business company all the partners have liability for the company’s debts and have right to company’s profits.

Limited Partnership

In this business structure of small business company limited partners have limited liability in accordance with the amount of capital invested by them in the company. Their share to the profit or loss of the company is also decided by the share of their investment in the small business company.

Limited Liability Company

This business structure is the combination of corporations and partnership companies. Its legal entity is similar to corporations but its’ tax liabilities are like partnerships. Owners of a limited liability company have limited liability. They have risk only for the amount of capital invested in the company. Their personal assets are not at risk as they have no personal liability but only limited liability to the small business company.

Small Business Company Benefits

Whatever be the business structure of the small business company, it enjoys a lot of importance and lot of advantages. It is not always the large business organizations who set the market trend; small business companies also play a vital role in determining the performance of the market. Small business companies possess flexibility in nature. So, whenever there is any change in the market scenario, they can easily adjust themselves to the market fluctuations. But, large business corporations very slowly react to the changes in the market because of being bureaucratic in nature. Generally, Small Business Companies offer personalized services to the customers, which is not possible for the large business houses. It has been observed that small business companies have a better chance of being successful than large business enterprises. A small business company can be started with a low level of investment. Plenty of hard work and honest effort can easily compensate this scarcity of capital. By not engaging in price war with large business corporations and by focusing on own product and business, a small business company can earn huge profits. Small Business Company can easily be distinctive in nature because of its adaptability to varying market equations. Differentiation from others makes product of the small business company unique, which in turn results in increased amount of sales. Another major advantage of small business company comes in the form of business credit. A small business company can get loans from different sources:

A small business company can get financial assistance from govt. with easy terms and condition. This not only provides economic support to the small business company, but at the same time, this association with govt. provides the company a certain degree of authenticity. There is no upper limit to the amount of loan that a small business company can get from government. A small business enterprise can get loans from the banks also. A small business company can also get credit from other industrial organizations and can also avail the facility of export financing.