Q1:L6 - Forms of Business Organization

What is a Business

A business is an organization or economic system where goods and services are exchanged for one another or for money.

4 Major Types of Business

1. Service Business is a type of business that provides intangible products. Service type firms offer professional skills, expertise, advice, and other similar products.

   • Ex: schools, repair shops, hair salons, banks, accounting firms and law firms.

2. Merchandising Business is a business which buys products at wholesale price and sells the same at retail price. They are known as “buy and sell” businesses. They make profit by selling the products at prices higher than their purchase costs.

   • Ex: grocery stores, convenient stores, distributors and other resellers.

3. Manufacturing Business unlike a merchandising business, buys products with the intention of using them as materials in making a new product. A manufacturing business combines raw materials, labor, and factory overhead in its production process. The manufactured goods will then be sold to customers.

   • Ex: baked good, shoe manufacturing, grape wine production, cosmetic manufacturing, processed food, canned goods, and others.

4. Hybrid Business is a company that may be classified in more than one type business. A restaurant, for example combines ingredients in making a fine meal (manufacturing), sells a cold bottle of wine (merchandising), and fills customer orders (service).

Forms of Business Ownership