Dimensions of Entrepreneurial Ventures

Business Structure

One of the first critical decisions and requirements to be made when forming a company is determining the formal structure of the organisation as it will impact issues such as liability, ownership, strategy, taxation and so on.

Four common different business structures are discussed as follows:

Sole proprietorship

Source: Wave

Sole proprietorship is a simple ownership type with several advantages, including the following:

• Simplicity: In most cases, sole proprietors operating under their own names can simply get to work without filing paperwork with the state. Thus, it is the simplest and the least expensive among the different types of business ownership.

• Control over the business: A sole proprietorship is owned by a single person. Therefore, the person has full control over decision-making.

• Pass-through taxation: Profits from a sole proprietorship pass through to the owner’s personal income, simplifying taxes significantly. 

Partnership

Source: LinkedIn

• A partnership is made up of one or two individuals (or partners) who share equally in profits and losses. Partners will have full legal responsibility for the business including debts against the business.

• In a general partnership, all partners manage the business. Profits and losses are shared by all partners, as are company assets and authority.

• In a limited partnership, one or more partners are not involved in the management of the business and are not personally liable for the partnership’s obligations.

Limited Liability Company

The limited liability structure combines the benefits of a corporation with the flexibility of a partnership. Major advantages offered by the LLC structure are:

• The business does not have to incorporate or pay corporate taxes

• One person alone can create an LLC

• Owners can be compensated through company profits

• Business losses can be reported against owners’ personal income

Corporation

Source: The Business Corporation

A corporation exists as a unique and separate entity from its owners or shareholders. It can be taxed, sued or entered into contractual agreements with its own rights and obligations.

• C Corporation: Subject to corporate income tax; shareholders have limited liability; profits are potentially taxed twice, at the corporate level and again as dividends to shareholders.

• S Corporation: Unlike C Corporation, profits and losses are passed through to shareholders’ personal tax returns, avoiding double taxation; subject to certain eligibility requirements.

Social Enterprise

Source: Social Impact Architects

Unlike traditional businesses, whose primary objective is to maximize profits for shareholders, a social enterprise focuses on creating a positive impact on society or addressing a pressing social, cultural, or environmental issue.

Although the focus is on social impact, social enterprises are structured to generate revenue through the sale of products or services. Profits are often reinvested into the business to further its social mission.

Size

In the business world, enterprises can be classified as either micro, small, medium or large depending on their size. Each category not only reflects the number of employees and the turnover but also differences in terms of structure, market scope and capacity to have economic impact.

Micro Enterprise

A micro-enterprise is often a sole trade business, an informal business that does not pay tax.

• Advantages: Many micro businesses require less capital to start with minimal overhead, keeping the operating costs low. Owners of micro businesses also have the flexibility to make quick decisions in many aspects including operations, marketing and finance.

• Challenges: Micro businesses often struggle to access significant funding from banks or investors due to a lack of collateral or proven business history. The scale and growth of the business are reliant on a personal network, operational expertise or financial backup by its owners who are usually a sole person.

Small Enterprise

A small enterprise is characterised by having fewer than 50 employees. The majority of them are independent businesses with a simple ownership and management structure.

• Advantages: The cost and time to set up a small business are more than the micro one but manageable. With fewer layers of bureaucracy and management, small businesses can quickly adapt to market changes and customer needs compared to larger corporations.

• Challenges: Small businesses often face intense competition from larger companies that can benefit from economies of scale, allowing them to offer lower prices or better marketing efforts. With fewer employees and resources, small businesses can be stretched thin when it comes to managing operations, marketing, customer services and other critical areas.

Medium Enterprise

Medium enterprise has between 50 to 99 employees. They form a bridge between small enterprises and large corporations, combining elements of both of these types of companies.

• Advantages: Medium businesses typically have more personnel, financial and infrastructure resources than small businesses. They can invest in better technologies, hire specialised employees and access larger financing opportunities from banks and investors. They also have more capacity to pursue growth such as expanding into new markets or launching new product lines.

• Challenges: As businesses grow in size, they face increased operational complexity coming from more complicated supply chains, greater regulatory requirements and the need for robust internal systems to manage different departments. That also means they will lose some agility and flexibility that smaller businesses enjoy.

Large Enterprise

A large organisation is a business that holds employees upwards of 100 employees. At this point, the organisational compliance and reporting requirements are significant and consistent.

• Advantages: Many large businesses operate on a global scale, giving them access to international markets, customers, and supply chains. This global reach allows them to diversify their revenue streams and reduce their reliance on any one market or region.

• Challenges: Since large organisations lead the way in size and other categories, the company can move slowly. They are less nimble and flexible when required to adapt to market needs and desires. The regulatory and reporting requirements are also complex, expensive and time-consuming.

Ownership

Entrepreneur ventures can be classified in terms of ownership. A private company is a company owned by its founders, management and/or a group of investors. Whereas, a public company sells a portion of its shares to the public and shareholders have a claim to part of the company’s assets and profits.

Private Ownership

• Ownership: Private companies belong to those established them and those invited to invest in them. Shares of the company are not publicly traded, and the ownership is usually more concentrated than in public companies.

• Privacy: Since they are not owned by the public, private executives/management don’t have to answer to stockholders or provide any company information to the public.

• Funding: When it comes to fundraising, private companies must turn to private funding, from either generated profits or borrowing money from banks, venture capitalists or other types of investors.

Public Ownership

• Ownership: Public companies are owned by shareholders who purchase company stock on a public stock exchange. Ownership can be widespread and include thousands or even millions of individual and institutional shareholders.

• Public disclosure: Public companies are required to file regular financial statements, disclose their earnings, and be transparent about business operations, allowing shareholders and the public to evaluate their performance.

• Funding: Public companies have easier access to capital because they can issue shares to the public through stock offerings. They can also issue bonds to raise funds, providing a greater ability to finance large projects and expansions.

Bottom Line

In conclusion, the dimensions of entrepreneurial ventures—spanning business structure, size, and ownership—play a critical role in shaping the trajectory and operations of any enterprise. Whether it’s the simplicity of sole proprietorship, the flexibility of a limited liability company, or the expansive reach of a large corporation, each structure offers unique advantages and challenges. Similarly, the size of the business and the nature of its ownership—private or public—can significantly impact its ability to access resources, respond to market demands, and achieve long-term growth. Understanding these dimensions is essential for entrepreneurs as they navigate the complex landscape of building and scaling successful ventures.

References

Gale 2020, Business structure, Gale Business: Entrepreneurship, Originally published in Encyclopedia of Management, 8th ed., available at <https://www.gale.com/open-access/business-types>.

Elizabeth, G 2022, 10 Types of Business Ownership and Classifications, The Motley Fool, available at <https://www.fool.com/the-ascent/small-business/articles/types-of-business-ownership/>.

Entrepreneur n.d., Choose Your Business Structure, Entrepreneur, available at <https://www.entrepreneur.com/growing-a-business/choose-your-business-structure/38822>.

Agility Business n.d., Micro, Small, Medium, or Large Business. Why size matters in business?, Agility Business, available at <https://www.agilitybusiness.com.au/knowledge-centre/micro-small-medium-or-large-whats-the-difference-in-business>.

MicroBank 2024, Small, medium and large enterprises: Differences and features in the business world, MicroBank, available at <https://www.microbank.com/en/blog/p/small-medium-and-large-enterprises–differences-and-features-in-the-business-world.html>.

Christina, M 2024, Private vs. Public Company: What’s the Difference?, Investopedia, available at <https://www.investopedia.com/ask/answers/difference-between-publicly-and-privately-held-companies/#:~:text=Private%20companies%20are%20owned%20by%20founders%2C%20executive%20management%2C%20and%20private,of%20the%20IPO%20and%20purchases>.