According to Investopedia, A business is defined as an organization or enterprising entity engaged in commercial, industrial, or professional activities. Businesses can be for-profit entities or they can be non-profit organizations that operate to fulfill a charitable mission or further a social cause.
The term “business” also refers to the organized efforts and activities of individuals to produce and sell goods and services for profit. Businesses range in scale from a sole proprietorship to an international corporation. Several lines of theory are engaged with understanding business administration including organizational behavior, organization theory, and strategic management.
Having a business name does not separate the business entity from the owner, which means that the owner of the business is responsible and liable for debts incurred by the business. If the business acquires debts, the creditors can go after the owner’s personal possessions. A business structure does not allow for corporate tax rates. The proprietor is personally taxed on all income from the business.
The term is also often used colloquially (but not by lawyers or by public officials) to refer to a company. A company, on the other hand, is a separate legal entity and provides for limited liability, as well as corporate tax rates. A company structure is more complicated and expensive to set up, but offers more protection and benefits for the owner.
Forms of Business
There are different forms of Businesses based or jurisdiction but there exists some common entities.
- Sole Proprietorship
A sole proprietorship, also known as a sole trader, is owned by one person and operates for their benefit. The owner operates the business alone and may hire employees. A sole proprietor has unlimited liability for all obligations incurred by the business, whether from operating costs or judgments against the business.
All assets of the business belong to a sole proprietor, including, for example, a computer infrastructure, any inventory, manufacturing equipment, or retail fixtures, as well as any real property owned by the sole proprietor.
A partnership is a business owned by two or more people. In most forms of partnerships, each partner has unlimited liability for the debts incurred by the business. The three most prevalent types of for-profit partnerships are general partnerships, limited partnerships, and limited liability partnerships.
According to Entrepreneur, A Corporation is a form of business operation that declares the business as a separate, legal entity guided by a group of officers known as the board of directors.
A corporate structure is perhaps the most advantageous way to start a business because the corporation exists as a separate entity. In general, a corporation has all the legal rights of an individual, except for the right to vote and certain other
limitations. Corporations are given the right to exist by the state that issues their charter. If you incorporate in one state to take advantage of liberal corporate laws but do business in another state, you’ll have to file for “qualification” in the state in which you wish to operate the business. There’s usually a fee that must be paid to qualify to do business in a state.
According to Wikipedia, A franchise is a system in which entrepreneurs purchase the rights to open and run a business from a larger corporation. Franchising in the United States is widespread and is a major economic powerhouse. One out of twelve retail businesses in the United States are franchised and 8 million people are employed in a franchised business.
The forms of businesses are not limited to these, but for briefness purposes, we have only emphasized on the aforementioned four(4).
Understanding A business
Generally, a business begins with a business concept (the idea) and a name. Depending on the nature of the business, extensive market research may be necessary to determine whether turning the idea into a business is feasible and if the business can deliver value to consumers. The business name can be one of the most valuable assets of a firm; careful consideration should thus be given when choosing it. Businesses operating under fictitious names must be registered with the state.
Businesses most often form after the development of a business plan, which is a formal document detailing a business’s goals and objectives, and its strategies of how it will achieve the goals and objectives. Business plans are almost essential when borrowing capital to begin operations.
It is also important to determine the legal structure of the business. Depending on the type of business, it may need to secure permits, adhere to registration requirements, and obtain licenses to legally operate. In many countries, corporations are considered to be juridical persons, meaning that the business can own property, take on debt, and be sued in court.