A business is defined as any organization or entity involved in commercial, manufacturing, or professional activities involving trade or commerce. The word “commerce” refers to the general activities of people engaged in buying and selling goods and services for gain. It includes the actual trading activity, the process of production, sale, and payment. In the United States, business activities include the distribution of a product by the manufacturer to the ultimate consumer, including the payment and receipt of the goods, and the transportation of the goods to their point of sale.
A business generally exists for profit. Profit is attained when the value of the total assets more than the total liabilities less the net worth of the enterprise. The value of the enterprise is determined through the application of financial principles such as the principle of economies of scale, the concept of marginal cost, and the concept of the condition value. Profits are the difference between actual costs less expected profits. A firm with increased over-all profits has a firm surplus, which is the difference between actual costs and expected profits.
A business organization’s long-term success depends on its ability to achieve and sustain competitive advantage through a flexible domestic and international policy that meets the desired goals of customers, employees, suppliers, and other businesses and organizations. The key to organizational success is its ability to adapt to changes in general economic conditions, technology, and financial requirements. When a business needs assistance with these matters, it often resorts to the aid of consultants who provide the following services:
Business consultants can help the business organization make money. The first service is providing knowledge about what makes a business profitable. This knowledge would help the consultant to assess the needs of the firm. For instance, if the company makes too many mistakes, it would help to know how to avoid them. Other problems that can cause profits to be lost include poor production quality or overloading of resources by workers without proper training. The ability to change direction quickly and adapt to changing market conditions is a must for all firms.
Some firms, as part of their strategy, have created a limited liability company (or LLC). A limited liability company provides a means for owners to shield their personal assets from lawsuits brought against the business. By creating this corporate structure, a business can limit its personal liability to its business debts. It also allows easy transfer of ownership should the owner suddenly leave the company. A limited liability company also allows management and reorganization of the business without having to create a corporation.
Another way for business organizations to reduce costs is to create a partnership. When partners agree to share in the costs and profits of the business, they are considered “partners” rather than mere investors. In effect, they are treated as one entity for tax purposes, though they are not taxed as one for personal use. Partnerships tend to have less risk than corporations, which means that profits and losses are spread out more evenly between the partners. This can be a big plus for small business organizations that do not have significant outside funds, but need a steady flow of profits to meet overhead and capital expenses.
One type of business structure that allows for minimal risks is sole proprietorship. With a sole proprietorship, the owner has control and ownership of the company but does not own any of the personal assets or property involved in the operation of the business. This makes it easier for the business owner to comply with corporate taxation and other business regulations because he does not have to give up his personal property to start a corporation, nor does he have to pay taxes on the profits he receives from the company. The downside is that when a business owner makes too much money, he may have no choice but to sell off the company’s assets to pay debts and other expenses.
Limited liability companies, sole proprietorship, and partnerships are different from each other in several ways. Each of these business structures has its pros and cons, so it is important for an individual entrepreneur to carefully consider the benefits and risks of each before making a final decision. An effective way to get the most out of a corporate form of incorporation is to consult a qualified business attorney who specializes in this field. He will be able to assess the suitability of a specific type of business structure for your business, and help you decide whether or not it is the right choice for your particular company.