Business is one of the most important aspects of any human enterprise. It not only involves earning income by means of production but it also involves sustaining that income through effective management of resources. The term “Business” actually encompasses a number of elements such as a corporation, partnership, association, firm, trust, partnership, proprietorship, and ownership.
A business is further defined as any individual or institution organized for carrying on commercial, industrial, and/or professional activities for profit. A business is further classified into two major types: sole proprietorship and partnership. A sole proprietorship is similar to the common definition of the corporation, except that the liability for debts of the members is shared by the partners. In a partnership, two or more persons form a partnership relationship. Partnerships are generally considered to be more advantageous than sole proprietorships because in a partnership each partner can retain and utilize his assets; in addition, he or she can also agree to certain transactions that otherwise may not be allowed in a sole proprietorship.
Many businesses today are built around a single core principle. The most well known of these principles is called franchising. Franchises allow a business owner to enter into a contract with a retailer who sells products or services under a specific name. Businesses are further categorized according to whether they are large medium or small businesses. Larger corporations are built around a number of different core principles; however, medium-sized businesses are built on many of the same business structures as small corporations. All businesses are built on a principle of service, product or service.
Service businesses provide a service, which earns profits from their performance. Profits are earned by the service provider in the form of fees paid to the retailer, shareholders or bondholders. Service revenues are generally derived from a single sale or a group of sales. A service provider may be compensated for an outstanding debt by receiving a percentage of the future profits of the corporation or providing a guarantee to the lender to repay part of the debts.
A profit sharing concept is a combination of two concepts often used together. One is ownership, in which a percentage of profits is paid to the shareholder or partners. The other is a subscription or royalty fee paid to the owners of intellectual property. Intellectual property is a term that includes trademarks, design patents and copyrights. Some of these are owned by individuals, but most are owned by businesses large and small. These businesses often own entire departments that deal with the development of new ideas, products and innovations.
A corporation is considered a legal entity, but unlike a sole proprietorship it does not have total control over the assets or equity. The company exists only to make money and then pay off its debts. Unlike a partnership, there are no shareholders; therefore, the management of the corporation is often elected by a majority of the board of directors. This is referred to as ‘boardroom management’. The reason for boardroom management is to ensure the best interests of stockholders. A corporation’s executive officer, also called officers of trust, are responsible for the day to day management of the affairs of the corporation.