Business & Profits

A business, also known as an enterprise or a firm, is an organization involved in the trade of goods, services, or both to consumers or to other businesses. Businesses are prevalent in capitalist economies, where most of them are privately owned and provide goods and services to customers for profit. Businesses may also be not-for-profit or state-owned. A business owned by multiple individuals may be referred to as a company, although that term also has a more precise meaning.

The etymology of "business" stems from the state of being busy, doing commercially viable and profitable work. The term "business" has at least three usages, depending on the scope in which it is used. In the singular usage business means a particular organization; a more generalized usage refers to a particular market sector, i.e. "the music business". Compound forms such as agribusiness represent subsets of the word's the broadest meaning, which encompasses all activity by all suppliers of goods and services.

Basic forms of ownership

Forms of business ownership vary by jurisdiction, but several common forms exist in most places:

Sole proprietorship: A sole proprietorship is owned by one person and operates for profit. The owner may operate the business alone or employ other people. A sole proprietor has unlimited liability for all obligations incurred by the business, whether from operating costs or judgements against the business. All assets of the business belong to a sole proprietor, including, for example, computer infrastructure, any inventory, manufacturing equipment and/or retail fixtures, as well as any real property owned by the business.

Partnership: 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.

Corporation: The owners of a corporation have limited liability and the business has a separate legal personality from its owners. Corporations can be either government-owned or owned by individuals. They can organize either for profit or as not-for-profit organizations. A non-government for-profit corporation is owned by its shareholders, who elect a board of directors to direct the corporation and hire its managerial staff. A privately owned, for-profit corporation can be either privately held by a small group of individuals, or publicly held, with publicly-traded shares listed on a stock exchange.

Cooperative: Often referred to as a "co-op", a cooperative is a limited liability business that can organize for-profit or not-for-profit. A cooperative differs from a corporation in that it has members, not shareholders, and they share decision-making authority. Cooperatives are typically classified as either consumer cooperatives or worker cooperatives. Cooperatives are fundamental to the ideology of economic democracy.

Classifications

Agriculture and mining businesses produce raw material, such as plants or minerals.

Financial businesses include banks and other companies that generate profits through investment and management of capital.

Information businesses generate profits primarily from the sale of intellectual property and include movie studios, publishers and internet and software companies.

Manufacturers produce products, from raw materials or from component parts, then sell their products at a profit. Companies that make tangible goods such as cars, clothing or pipes are considered manufacturers.

Real estate businesses sell, rent, and develop of properties including land, residential homes, and other buildings.

Retailers and distributors act as middlemen and get goods produced by manufacturers to the intended consumers, and make their profits by marking up their price. Most stores and catalog companies are distributors or retailers.

Service businesses offer intangible goods or services and typically charge for labor or other services provided to government, consumers, or other businesses. Interior decorators, consulting firms and even entertainers are service businesses.

Transportation businesses deliver goods and individuals to their destinations for a fee.

Utilities produce public services such as electricity or sewage treatment, usually under a government charter.

Management

The efficient and effective operation of a business, and study of this subject, is called management.

The major branches of management are financial management, marketing management, human resource management, strategic management, production management, operations management, service management and information technology management.

Owners may administer their businesses themselves, or employ of managers to do this for them. Whether they are owners or employees, managers administer three primary components of the business' value: its financial resources, capital or tangible resources, and human resources. These resources are administered in at least five functional areas: legal contracting, manufacturing or service production, marketing, accounting, financing, and human resources.

Restructuring state enterprises

In recent decades, various states modeled some of their assets and enterprises after business enterprises. In 2003, for example, the People's Republic of China modeled 80% of its state-owned enterprises on a company-type management system.

Many state institutions and enterprises in China and Russia have transformed into joint-stock companies, with part of their shares being listed on public stock markets.

Business process management (BPM) is a holistic management approach focused on aligning all aspects of an organization with the wants and needs of clients.

It promotes business effectiveness and efficiency while striving for innovation, flexibility, and integration with technology. BPM attempts to improve processes continuously. It can therefore be described as a "process optimization process." It is argued that BPM enables organizations to be more efficient, more effective and more capable of change than a functionally focused, traditional hierarchical management approach.

Organization and government regulation

Most legal jurisdictions specify the forms of ownership that a business can take, creating a body of commercial law for each type.
The major factors affecting how a business is organized are usually:

The size and scope of the business firm and its structure, management, and ownership, broadly analyzed in the theory of the firm. Generally a smaller business is more flexible, while larger businesses, or those with wider ownership or more formal structures, will usually tend to be organized as corporations or (less often) partnerships. In addition, a business that wishes to raise money on a stock market or to be owned by a wide range of people will often be required to adopt a specific legal form to do so.
The sector and country. Private profit-making businesses are different from government-owned bodies. In some countries, certain businesses are legally obliged to be organized in certain ways.
Limited Liability Companies (LLC), limited liability partnerships, and other specific types of business organization protect their owners or shareholders from business failure by doing business under a separate legal entity with certain legal protections. In contrast, unincorporated businesses or persons working on their own are usually not so protected.
Tax advantages. Different structures are treated differently in tax law, and may have advantages for this reason.
Disclosure and compliance requirements. Different business structures may be required to make less or more information public (or report it to relevant authorities), and may be bound to comply with different rules and regulations.

Many businesses are operated through a separate entity such as a corporation or a partnership (either formed with or without limited liability). Most legal jurisdictions allow people to organize such an entity by filing certain charter documents with the relevant Secretary of State or equivalent and complying with certain other ongoing obligations. The relationships and legal rights of shareholders, limited partners, or members are governed partly by the charter documents and partly by the law of the jurisdiction where the entity is organized.

Generally speaking, shareholders in a corporation, limited partners in a limited partnership, and members in a limited liability company are shielded from personal liability for the debts and obligations of the entity, which is legally treated as a separate "person". This means that unless there is misconduct, the owner's own possessions are strongly protected in law if the business does not succeed - Source