Business is the lifeblood of the modern economy. Every year, companies spend millions of dollars in advertisements, media campaigns, conventions and meetings to promote themselves and their products. A business is generally defined as an entity or individual engaged in business, commercial, or professional activities for profit. Businesses may be privately owned, partially owned by an individual or corporation, or publicly held corporations operating for the benefit of shareholders.
Business enterprises develop goals and strategies to achieve specific objectives. These objectives may be related to achieving market share, increasing sales, reducing costs, increasing productivity, maximizing returns, expanding market reach, reducing financial risk, and changing customer tastes and preferences. Most businesses also try to influence other businesses to adopt similar practices, develop similar products or services, or make similar claims. Business enterprises also attempt to build long-term competitive advantages. For example, a manufacturer may engage in research and development activities to produce a new product that is superior to competing products on the market. In addition, business organizations may engage in buying or leasing various assets to increase their own inventory.
Business enterprises exist to generate a profit. Profit is the result of the difference between total expenses less total profits. Profits are the difference between actual gain and total loss or value of all assets, including goodwill and intangible assets. Individuals working in businesses must continually invest in order to generate profits. This investment may be in the form of capital assets or plant and equipment.
Many businesses have multiple core activities, such as research and development, manufacturing, selling, and distribution. All of these activities are essential to delivering value to customers and enhancing the profitability of the enterprise. All of these activities are required in order to realize the objectives of the business enterprise. A company’s success depends largely on the ability to identify, plan, execute, and realize its objectives. A business needs to have certain organizational structures in place in order to maximize these objectives and apply a consistent, orderly approach to achieving them.
When a business incorporates, it establishes a formal structure known as a business organization. The purpose of incorporating is to formalize the business relationship and ensure that all parties involved are properly represented and coordinated. An example of a business organization is a partnership. A partnership is a relationship in which two or more people are involved in a joint venture.
All individuals working in businesses may be owners, but they are often not considered owners by the powers that be. The powers that be to treat these individuals as joint owners for the purposes of taxation. This tax treatment may be different for different businesses. Some businesses may be operated pass-through entities, which are not formally incorporated. Pass-through entities are only considered to be tax-efficient when they have an office and employees and meet the specific requirements for taxation.
Many businesses incorporate for many reasons. Most incorporate to shield their owners from personal lawsuits that can arise from activities within the business. Individuals who own their own businesses can only be sued by other individuals who are related to the business or by a third party who damage their goods and carries their liabilities. A sole proprietorship is rarely sued, and many sole proprietors use their profits to invest in additional goods and services for the benefit of their employees, which generates a social benefit.
A sole proprietorship or a partnership may be formed to create an unlimited liability company. These types of business structures may offer significant social benefit to all parties involved. Partnerships allow businesses to use one business for their product lines and extend those products to multiple outlets. This means that many businesses may form a large chain of outlet malls to offer consumers the convenience of purchasing products at one location. This is a tremendous social benefit and is the primary reason that so many businesses form limited liability companies today.