Business

Images with doller in it.

What Is a Business?

The term business refers to an organization or enterprising entity engaged in commercial, industrial, or professional activities. The purpose of a business is to organize some sort of economic production (of goods or services). Businesses can be for-profit entities or non-profit organizations fulfilling a charitable mission or furthering a social cause. Businesses range in scale and scope from sole proprietorships to large, international corporations.

Business also refers to the efforts and activities taken by individuals to produce and sell goods and services for profit.

Classifications

• Agriculture, such as the domestication of fish, animals, and livestock, as well as lumber, oil, vegetables, fruits, etc.
• Mining businesses that extract natural resources and raw materials, such as wood, petroleum, natural gas, ores, metals or minerals.
• Service businesses offer intangible goods or services and typically charge for labor or other services provided to government, to consumers, or to other businesses. Interior decorators, beauticians, hair stylists, make-up artists, tanning salons, laundromats, dry cleaners, and pest controllers are service businesses.
• Financial services businesses include banks, brokerage firms, credit unions, credit cards, insurance companies, asset and investment companies such as private-equity firms, private-equity funds, real estate investment trusts, sovereign wealth funds, pension funds, mutual funds, index funds, hedge funds, stock exchanges, and other companies that generate profits through investment and management of capital.
• Transportation businesses such as railways, airlines, and shipping companies deliver goods and individuals to their destinations for a fee.
• Utilities produce public services such as water, electricity, waste management or sewage treatment. These industries are usually operated under the charge of a public government.
• Entertainment companies and mass media agencies generate profits primarily from the sale of intellectual property. They include film studios and production houses, mass media companies such as cable television networks, online digital media agencies, talent agencies, mobile media outlets, newspapers, book and magazine publishing houses.
• Sports organizations are involved in producing, facilitating, promoting, or organizing any activity, experience, or business enterprise focused on sports. They make their profits by selling goods and services that are sports related.
• Industrial manufacturers produce products, either from raw materials or from component parts, then export the finished products at a profit. They include tangible goods such as cars, buses, medical devices, glass, or aircraft.
• Real estate businesses sell, invest, construct and develop properties, including land, residential homes, and other buildings.
• Retailers, wholesalers, and distributors act as middlemen and get goods produced by manufacturers to the intended consumers; they make their profits by marking up their prices. Most stores and catalog companies are distributors or retailers.

Business Types

There are many ways to organize a business, and there are various legal structures that correspond with these. Among others, businesses are commonly classified and generally structured as:

• Sole proprietorships: As the name suggests, a sole proprietorship is owned and operated by a single person. There is no legal separation between the business and the owner, which means the tax and legal liabilities of the business are the responsibility of the owner.
• Partnerships: A partnership is a business relationship between two or more people who together conduct business. Each partner contributes resources and money to the business and shares in the profits and losses of the business. The shared profits and losses are recorded on each partner’s tax return.
• Corporations: A corporation is a business in which a group of people acts as a single entity. Owners are commonly referred to as shareholders who exchange consideration for the corporation’s common stock. Incorporating a business releases owners of the financial liability of business obligations. A corporation comes with unfavorable taxation rules for the owners of the business.
• Limited liability companies (LLCs): This is a relatively new business structure and was first available in Wyoming in 1977 and in other states in the 1990s. A limited liability company combines the pass-through taxation benefits of a partnership with the limited liability benefits of a corporation.

How Do You Start a Business?

There are several steps you need to take to start a business. This includes conducting market research, developing a business plan, seeking capital or other forms of funding, choosing a location and business structure, picking the right name, submitting registration paperwork, obtaining tax documents and pulling permits and licenses. It’s also a good idea to set up a bank account with a financial institution to facilitate your everyday banking needs

How Do You Write a Business Plan?

Business plans are essential to running your business and can help you secure the funding you need to start your operations. You can choose between a traditional or a lean business plan.

A traditional business plan is very comprehensive with a lot of details. This includes a summary of the company and the ways it will succeed. It also includes information about your market, management, products and services, marketing, and sales projections.

Lean formats are shorter but still contain very useful information such as partnership details, outlines of the business activities and customer relationships, cost structures, and revenue streams.

You can find templates online or come up with your business plan document.

The Bottom Line

Businesses are the backbone of an economy. They provide products and services that can be purchased by individuals and other companies.

Businesses range in size from small to large and operate in many different industries. Business structures also vary from sole partnerships to major corporations that provide shareholder equity to their owners.

When starting a business, do your research and develop a business plan. This allows you to raise the money you need to start your operation. Bye!