Organization undertaking commercial, industrial, or professional activity
For other uses, seeBusiness (disambiguation).
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Businessis the activity of making ones living or making money by producing or buying and sellingproducts(such as goods and services).12need quotation to verify34Simply put, it is any activity or enterprise entered into for profit. It does not mean it is a company, a corporation, partnership, or have any such formal organization, but it can range from a street peddler to General Motors.5
Having abusiness namedoes not separate the business entity from the owner, which means that the owner of the business is responsible and liable for debts incurred by the business. If the business acquires debts, the creditors can go after the owners personal possessions. A business structure does not allow for corporate tax rates. The proprietor is personally taxed on all income from the business.
The term is also often used colloquially (but not by lawyers or by public officials) to refer to acompany. A company, on the other hand, is a separate legal entity and provides forlimited liability, as well ascorporate taxrates. A company structure is more complicated and expensive to set up, but offers more protection and benefits for the owner.
Forms of business ownership vary byjurisdiction, but several common entities exist:
Asole proprietorship, also known as a sole trader, is owned by one person and operates for their benefit. The owner operates the business alone and may hireemployees. A sole proprietor has unlimitedliabilityfor all obligations incurred by the business, whether fromoperating costsorjudgmentsagainst the business. Allassetsof the business belong to a sole proprietor, including, for example, a computer infrastructure, anyinventorymanufacturingequipment, or, as well as anyreal propertyowned by the sole proprietor.
Apartnershipis 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 aregeneral partnershipslimited partnerships, andlimited liability partnerships.
The owners of acorporationhavelimited liabilityand the business has a separatelegal personalityfrom its owners. Corporations can be eithergovernment-ownedor privately owned, and they can organize either for profit or asnonprofit organizations. A privately owned, for-profit corporation is owned by itsshareholders, who elect aboard of directorsto direct the corporation and hire its managerial staff. A privately owned, for-profit corporation can be eitherprivately heldby a small group of individuals, orpublicly held, with publicly tradedshareslisted on astock exchange.
Often referred to as a co-op, acooperativeis a limited-liability business that can organize as 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 eitherconsumer cooperativesorworker cooperatives. Cooperatives are fundamental to the ideology ofeconomic democracy.
Limited liability companies (LLC), limited liability partnerships, and other specific types of business organization protect their owners or shareholders frombusiness failureby doing business under a separate legal entity with certain legal protections. In contrast, unincorporated businesses or persons working on their own are usually not as protected.
Afranchiseis a system in which entrepreneurs purchase the rights to open and run a business from a larger corporation.
Franchising in the United States is widespread and is a major economic powerhouse. One out of twelve retail businesses in the United States are franchised and 8 million people are employed in a franchised business.
Commonly used where companies are formed for non-commercial purposes, such as clubs or charities. The members guarantee the payment of certain (usually nominal) amounts if the company goes intoinsolvent liquidation, but otherwise, they have no economic rights in relation to the company. This type of company is common inEngland. A company limited by guarantee may be with or without havingshare capital.
The most common form of the company used for business ventures. Specifically, a limited company is a company in which the liability of each shareholder is limited to the amount individually invested with corporations being the most common example of a limited company.
This type of company is common inEnglandand many English-speaking countries. A company limited by shares may be a
A company limited by guarantee with a share capital:
A hybrid entity, usually used where the company is formed for non-commercial purposes, but the activities of the company are partly funded by investors who expect a return. This type of company may no longer be formed in the UK, although provisions still exist in law for them to exist.
A companystatutorily authorized in certain statesthat is characterized by limited liability, management by members or managers, and limitations on ownership transfer, i.e., L.L.C.
LLC structure has been called hybrid in that it combines the characteristics of a corporation and of a partnership or sole proprietorship. Like a corporation, it has limited liability for members of the company, and like a partnership, it has flow-through taxation to the members and must be dissolved upon the death or bankruptcy of a member.
Anunlimited companywith or without a share capital:
A hybrid entity, a company where the liability of members or shareholders for the debts (if any) of the company are not limited. In this case, the doctrine of a veil of incorporation does not apply.
and not companies as the term is commonly understood today.
Before the passing of modern companies legislation, these were the only types of companies. Now they are relatively rare, except for very old companies that still survive (of which there are still many, particularly many British banks), or modern societies that fulfill a quasi-regulatory function (for example, theBank of Englandis a corporation formed by a modern charter).
Relatively rare today, certain companies have been formed by a private statute passed in the relevant jurisdiction.
Note that Ltd after the companys name signifies limited company, and PLC (public limited company) indicates that its shares are widely held.14
In legal parlance, the owners of a company are normally referred to as the members. In a company limited or unlimited by shares (formed or incorporated with a share capital), this will be theshareholders. In a company limited by guarantee, this will be the guarantors. Someoffshore jurisdictionshave created special forms ofoffshore companyin a bid to attract business for their jurisdictions. Examples includesegregated portfolio companiesand restricted purpose companies.
There are, however, many, many sub-categories of types of company that can be formed in various jurisdictions in the world.
Companies are also sometimes distinguished intopublic companiesandprivate companiesfor legal and regulatory purposes. Public companies are companies whose shares can be publicly traded, often (although not always) on astock exchangewhich imposeslisting requirementsListing Rulesas to the issued shares, the trading of shares and a future issue of shares to help bolster the reputation of the exchange or particular market of exchange. Private companies do not have publicly traded shares, and often contain restrictions on transfers of shares. In some jurisdictions, private companies have maximum numbers of shareholders.
Aparent companyis a company that owns enough voting stock in another firm to control management and operations by influencing or electing its board of directors; the second company being deemed as a subsidiary of the parent company. The definition of a parent company differs by jurisdiction, with the definition normally being defined by way of laws dealing with companies in that jurisdiction.
Agriculture, such as the domestication of fish, animals, and livestock, as well aslumberoilandminingbusinesses that extract natural resources and raw materials, such aswoodpetroleumnatural gasores, plants orminerals.
businesses includebanksbrokerage firmscredit unionscredit cardsinsurance companiesassetandinvestment companiessuch asprivate equity firmsprivate equity fundsreal estate investment trustssovereign wealth fundspension fundsmutual fundsindex funds, andhedge fundsstock exchanges, and other companies that generate profits through investment and management ofcapital.
Entertainmentcompanies andmass mediaagencies generate profits primarily from the sale ofintellectual property. They includefilm studiosandproduction houses, mass media companies such ascable television networks, onlinedigital mediaagencies,talent agenciesmobile mediaoutlets,newspapersbookandmagazine publishinghouses.
Industrialmanufacturersproduceproducts, either fromraw materialsor from component parts, then export the finished products at aprofit. They includesuch ascarsbusesmedical devicesglass, oraircraft.
Real estatebusinesses sell, invest, construct and developproperties, includingland, residentialhomes, and other buildings.
Retailerswholesalers, anddistributorsact 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.
Transportationbusinesses such asrailwaysairlinesshipping companiesthat deliver goods and individuals to their destinations for a fee.
Utilitiesproducepublic servicessuch aswaterelectricitywaste managementorsewage treatment. These industries are usually operated under the charge of a publicgovernment.
Service businessesoffer intangible goods or services and typically charge for labor or other services provided togovernment, toconsumers, or to other businesses. Interior decorators, beauticians, hair stylists, make-up artists, tanning salons, laundromats, dry cleaners, and pest controllers are service businesses.
Accounting is the measurement, processing, and communication of financial information abouteconomic entities1516such as businesses andcorporations. The modern field was established by theItalianmathematicianLuca Pacioliin 1494.17Accounting, which has been called the language of business,18measures the results of an organizations economic activities and conveys this information to a variety of users, includinginvestorscreditorsmanagement, andregulators.19Practitioners of accounting are known asaccountants. The terms accounting and financial reporting are often used as synonyms.
Finance is a field that deals with the study ofinvestments. It includes the dynamics ofassetsandliabilitiesover time under conditions of different degrees of uncertainty and risk. Finance can also be defined as the science of money management. Finance aims to price assets based on their risk level and their expectedrate of return. Finance can be broken into three different sub categories:public financecorporate finance, andpersonal finance.
Manufacturingis the production ofmerchandisefor use or sale usinglabourandmachinestools, chemical and biological processing, or formulation. The term may refer to a range of human activity, fromhandicrafttohigh tech, but is most commonly applied toindustrialproduction, in whichraw materialsare transformed intofinished goodson a large scale.
Marketing is defined by theAmerican Marketing Associationasthe activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.20The term developed from the original meaning which referred literally to going to a market to buy or sell goods or services. Marketing tactics includeadvertisingas well as determining productpricing.
With the rise in technology, marketing is further divided into a class calleddigital marketing. It is marketing products and services using digital technologies.
Research and development refer to activities in connection with corporate or government innovation. Research and development constitute the first stage of development of a potential new service or product. Research and development are very difficult to manage since the defining feature of the research is that the researchers do not know in advance exactly how to accomplish the desired result.citation needed
Injuries cost businesses billions of dollars annually.21Studies have shown how company acceptance and implementation of comprehensive safety and health management systems reduce incidents,insurancecosts, and workers compensation claims.22New technologies, like wearable safety devices23and available online safety training, continue to be developed to encourage employers to invest in protection beyond thecanary in the coal mineand reduce the cost to businesses of protecting their employees.
Sales are activity related to selling or the number of goods or services sold in a given time period. Sales are often integrated with all lines of business and are key to a companies success.24
The efficient and effectiveoperation of a business, and study of this subject, is calledmanagement. The major branches of management arefinancial managementmarketingmanagement,human resource managementstrategic managementproduction managementoperations managementservice management, andinformation technology management.citation needed
Owners may manage their businesses themselves, or employ managers to do so for them. Whether they are owners or employees, managers administer three primary components of the business value: financial resources, capital (tangible resources), and human resources. These resources are administered in at least six functional areas: legal contracting, manufacturing or service production, marketing, accounting, financing, and human resources.citation needed
In recent decades, states modeled some of theirassetsand enterprises after business enterprises. In 2003, for example, thePeoples Republic of Chinamodeled 80% of itsstate-owned enterpriseson a company-type management system.25Many 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. 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, effective and capable of change than a functionally focused, traditional hierarchical management approach.who?
Most legaljurisdictionsspecify the forms of ownership that a business can take, creating a body ofcommercial lawfor each type.
The major factors affecting how a business is organized are usually:
and its structure, management, and ownership, broadly analyzed in thetheory 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 astock marketor to be owned by a wide range of people will often be required to adopt a specific legal form to do so.
Private profit-making businesses are different from government-owned bodies. In some countries, certain businesses are legally obliged to be organized in certain ways.
Different structures are treated differently in tax law and may have advantages for this reason.
. 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 ofshareholders, 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 frompersonal liabilityfor the debts and obligations of the entity, which is legally treated as a separate person. This means that unless there is misconduct, the owners own possessions are strongly protected in law if the business does not succeed.
Where two or more individuals own a business together but have failed to organize a more specialized form of vehicle, they will be treated as a general partnership. The terms of a partnership are partly governed by a partnership agreement if one is created, and partly by the law of the jurisdiction where the partnership is located. No paperwork or filing is necessary to create a partnership, and without an agreement, the relationships and legal rights of the partners will be entirely governed by the law of the jurisdiction where the partnership is located. A single person who owns and runs a business is commonly known as asole proprietor, whether that person owns it directly or through a formally organized entity. Depending on the business needs, an adviser can decide what kind is proprietorship will be most suitable.
A few relevant factors to consider in deciding how to operate a business include:
General partners in a partnership (other than a limited liability partnership), plus anyone who personally owns and operates a business without creating a separate legal entity, are personally liable for the debts and obligations of the business.
Generally, corporations are required to pay tax just like real people. In some tax systems, this can give rise to so-calleddouble taxation, because first the corporation pays tax on the profit, and then when the corporation distributes its profits to its owners, individuals have to include dividends in their income when they complete their personal tax returns, at which point a second layer of income tax is imposed.
In most countries, there are laws which treat small corporations differently from large ones. They may be exempt from certain legal filing requirements or labor laws, have simplified procedures in specialized areas, and have simplified, advantageous, or slightly different tax treatment.
Going public through a process known as aninitial public offering(IPO) means that part of the business will be owned by members of the public. This requires the organization as a distinct entity, to disclose information to the public, and adhering to a tighter set of laws and procedures. Most public entities are corporations that have sold shares, but increasingly there are also publicLLCsthat sell units (sometimes also called shares), and other more exotic entities as well, such as, for example,real estate investment trustsin the US, andunit trustsin the UK. A general partnership cannot go public.
Officesin theLos AngelesDowntown Financial District
A very detailed and well-established body of rules that evolved over a very long period of time applies to commercial transactions. The need to regulate trade and commerce and resolve business disputes helped shape the creation of law and courts. TheCode of Hammurabidates back to about 1772 BC for example and contains provisions that relate, among other matters, toshippingcosts and dealings between merchants andbrokers.26The word corporation derives from the Latincorpus, meaning body, and theMaurya Empirein Iron-Age India accorded legal rights to business entities.27
In many countries, it is difficult to compile all the laws that can affect a business into a single reference source. Laws can govern the treatment of labour and employee relations,worker protection and safety, discrimination on the basis of age, gender, disability, race, and in some jurisdictions, sexual orientation, and the minimum wage, as well asunions, worker compensation, and working hours and leave.
Some specialized businesses may also require licenses, either due to laws governing entry into certain trades, occupations or professions, that require special education or to raise revenue for local governments. Professions that require special licenses include law, medicine, piloting aircraft, selling liquor, radio broadcasting, selling investment securities, selling used cars, and roofing. Local jurisdictions may also require special licenses and taxes just to operate a business.
Some businesses are subject to ongoing special regulation, for example,public utilities, investment securities, banking, insurance,broadcastingaviation, and health care providers. Environmental regulations are also very complex and can affect many businesses.
When businesses need to raise money (calledcapital), they sometimes offersecuritiesfor sale.
Capital may be raised through private means, by aninitial public offeringor IPO on astock exchange, or in other ways.
Major stock exchanges include theShanghai Stock ExchangeSingapore ExchangeHong Kong Stock ExchangeNew York Stock ExchangeandNASDAQ(the USA), theLondon Stock Exchange(UK), theTokyo Stock Exchange(Japan), andBombay Stock Exchange(India). Most countries with capital markets have at least one.
Businesses that have gone public are subject to regulations concerning their internal governance, such as how executive officers compensation is determined, and when and how information is disclosed to shareholders and to the public. In the United States, these regulations are primarily implemented and enforced by the United States Securities and Exchange Commission (SEC). Other western nations have comparable regulatory bodies. The regulations are implemented and enforced by the China Securities Regulation Commission (CSRC) in China. In Singapore, the regulatory authority is the Monetary Authority of Singapore (MAS), and in Hong Kong, it is the Securities and Futures Commission (SFC).
The proliferation and increasing complexity of the laws governing business have forced increasing specialization in corporate law. It is not unheard of for certain kinds of corporate transactions to require a team of five to ten attorneys due to sprawling regulation. Commercial law spans general corporate law, employment and labor law, health-care law, securities law, mergers and acquisitions, tax law, employee benefit plans, food and drug regulation, intellectual property law on copyrights, patents, trademarks, telecommunications law, and financing.
Other types of capital sourcing include crowdsourcing on the Internet, venture capital, bank loans, and debentures.
Businesses often have importantintellectual propertythat needs protection from competitors for the company to stay profitable. This could requirepatentscopyrightstrademarks, or preservation oftrade secrets. Most businesses have names, logos, and similar branding techniques that could benefit from trademarking. Patents and copyrights in the United States are largely governed by federal law, while trade secrets and trademarking are mostly a matter of state law. Because of the nature of intellectual property, a business needs protection in every jurisdiction in which they are concerned about competitors. Many countries are signatories to internationaltreatiesconcerning intellectual property, and thus companies registered in these countries are subject to national laws bound by these treaties. In order to protect trade secrets, companies may require employees to sign noncompete clauses which will impose limitations on an employees interactions with stakeholders, and competitors.
A trade union (or labor union) is anorganization of workerswho have come together to achieve common goals such as protecting the integrity of its trade, improving safety standards, achieving higher pay and benefits such as health care and retirement, increasing the number of employees an employer assigns to complete the work, and betterworking conditions. The trade union, through its leadership, bargains with the employer on behalf of union members (rank and filemembers) and negotiateslabor contractscollective bargaining) with employers. The most common purpose of these associations or unions is maintaining or improving the conditions of theiremployment.28This may include the negotiation ofwages, work rules, complaint procedures, rules governing hiring, firing, and promotion of workers, benefits,workplace safetyand policies.
Compare:American Heritage Dictionarybusiness [:] 1. The activity of buying and sellingcommodities, products, or services.
Longman Dictionary of Contemporary Englishbusiness [:] 1 […] the activity of making money by producing or buying and selling goods, or providing services.
Oxford Living Dictionariesbusiness [:] 2 The practice of making ones living by engaging incommerce.
, 4E. S.v. business. Retrieved April 1, 2018 from
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