Business is the activity of making one's living or making money by
producing or buying and selling goods or services. Simply
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. The term is also often used colloquially (but not by
lawyers or public officials) to refer to a company, but this article
will not deal with that sense of the word.
Anyone carrying on an activity that earns them a profit is doing
business or running a business, and perhaps this is why there is a
misconception that business and company is the same thing.
A business name structure does not separate the business entity from
the owner, which means that the owner of the business is responsible
and liable for all debts incurred by the business. If the business
acquires debts[,] the creditor or creditors can go after your personal
possessions. A business structure does not allow for corporate tax
rates. The proprietor is personally taxed on all income from the
A company on the other hand, is a separate legal entity and provides
for limited liability as well as corporate tax rates. A company
structure is more complicated and expensive to set up, but offers more
protection and benefits for the owner.
3.5 Research and development
4.1 Restructuring state enterprises
Organization and regulation
5.1 Commercial law
5.3 Intellectual property
6 See also
Main article: List of business entities
Forms of business ownership vary by jurisdiction, but several common
Sole proprietorship: A sole 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 hire employees. A sole
proprietor has unlimited liability for all obligations incurred by the
business, whether from operating costs or judgments against the
business. All assets of the business belong to a sole proprietor,
including, for example, computer infrastructure, any inventory,
manufacturing equipment, or retail fixtures, as well as any real
property owned by the sole proprietor.
Partnership: A partnership is 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 are: general partnerships, limited
partnerships, and limited liability partnerships.
Corporation: The owners of a corporation have limited liability and
the business has a separate legal personality from its owners.
Corporations can be either government-owned or privately owned. They
can organize either for profit or as nonprofit organizations. A
privately owned, for-profit corporation is owned by its shareholders,
who elect a board of directors to direct the corporation and hire its
managerial staff. A privately owned, for-profit corporation can be
either privately held by a small group of individuals, or publicly
held, with publicly traded shares listed on a stock exchange.
Cooperative: Often referred to as a "co-op", a cooperative is 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 either consumer
cooperatives or worker cooperatives. Cooperatives are fundamental to
the ideology of economic democracy.
Limited liability companies (LLC), limited liability partnerships, and
other specific types of business organization protect their owners or
shareholders from business failure by 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.
Franchises: A franchise is 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
A company limited by guarantee. Commonly used where companies are
formed for noncommercial purposes, such as clubs or charities. The
members guarantee the payment of certain (usually nominal) amounts if
the company goes into insolvent liquidation, but otherwise, they have
no economic rights in relation to the company. This type of company is
common in England. A company limited by guarantee may be with or
without having share capital.
A company limited by shares. 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 in
England and many English-speaking countries. A company limited by
shares may be a
publicly traded company or a
privately held company.
A company limited by guarantee with a share capital. A hybrid entity,
usually used where the company is formed for noncommercial 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 limited liability company. "A company—statutorily authorized in
certain states—that 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".
An unlimited company with 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 doctrine of a
veil of incorporation does not apply.
Less common types of companies are:
Companies formed by letters patent. Most corporations by letters
patent are corporations sole and not companies as the term is commonly
Charter corporations. 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
England is a corporation formed by a modern
Statutory companies. Relatively rare today, certain companies have
been formed by a private statute passed in the relevant jurisdiction.
Note that "Ltd after the company's name signifies limited company, and
PLC (public limited company) indicates that its shares are widely
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 the shareholders. In
a company limited by guarantee, this will be the guarantors. Some
offshore jurisdictions have created special forms of offshore company
in a bid to attract business for their jurisdictions. Examples include
"segregated portfolio companies" and 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 for legal and regulatory
purposes between public companies and private companies. Public
companies are companies whose shares can be publicly traded, often
(although not always) on a stock exchange which imposes listing
Listing Rules as to the issued shares, the trading of
shares and future issue of shares to help bolster the reputation of
the exchange or particular market of an 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.
A parent company is 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 as lumber, oil and mining businesses that extract natural
resources and raw materials, such as wood, petroleum, natural gas,
ores, plants or minerals.
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, and hedge funds, stock exchanges, and other
companies that generate profits through investment and management of
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.
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.
Transportation businesses such as railways, airlines, shipping
companies that deliver goods and individuals to their destinations for
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.
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,
hairstylists, make-up artists, tanning salons, laundromats, dry
cleaners, and pest controllers are service businesses.
Main article: Accounting
Accounting is the measurement, processing and communication of
financial information about economic entities such as
businesses and corporations. The modern field was established by the
Luca Pacioli in 1494. Accounting, which has
been called the "language of business", measures the results of an
organization's economic activities and conveys this information to a
variety of users, including investors, creditors, management, and
regulators. Practitioners of accounting are known as accountants.
The terms "accounting" and "financial reporting" are often used as
Main article: Finance
Finance is a field that deals with the study of investments. It
includes the dynamics of assets and liabilities over time under
conditions of different degrees of uncertainty and risk.
also be defined as the science of money management.
Finance aims to
price assets based on their risk level and their expected rate of
Finance can be broken into three different sub-categories:
public finance, corporate finance and personal finance.
Main article: Manufacturing
Manufacturing is the production of merchandise for use or sale using
labour and machines, tools, chemical and biological processing, or
formulation. The term may refer to a range of human activity, from
handicraft to high tech, but is most commonly applied to industrial
production, in which raw materials are transformed into finished goods
on a large scale.
Main article: Marketing
Marketing is defined by the American
Marketing Association as "the
activity, set of institutions, and processes for creating,
communicating, delivering, and exchanging offerings that have value
for customers, clients, partners, and society at large." The term
developed from the original meaning which referred literally to going
to a market to buy or sell goods or services.
include advertising as well as determining product pricing.
With the rise in technology, marketing is further divided into a class
called digital marketing. It is marketing products and services using
Research and development
Main article: Research and development
Research and development
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
Research and development
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
Main article: Safety
Safety is a key business concept that is defined by
“the condition of being safe from undergoing or causing hurt,
injury, or loss”. Injuries cost businesses billions of dollars
annually. Studies have shown how company acceptance and
implementation of comprehensive safety and health management systems
reduces incidents, insurance costs and workers’ compensation
claims. New technologies, like wearable safety devices and
available online safety training, continue to be developed to
encourage employers to invest in protection beyond the "canary in the
coalmine" and reduce the cost to businesses of protecting their
Main article: Sales
Sales are activity related to selling or the amount of goods or
services sold in a given time period.
Main article: Management
Outline of business management
The efficient and effective operation of a business, and study of this
subject, is called management. The major branches of management are
financial management, marketing management, human resource management,
strategic management, production management, operations management,
service management, and information technology management.[citation
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.
Restructuring state enterprises
In recent decades, states modeled some of their assets and enterprises
after business enterprises. In 2003, for example, the People's
China modeled 80% of its state-owned enterprises on a
company-type management system. Many state institutions and
China and Russia have transformed into joint-stock
companies, with part of their shares being listed on public stock
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?]
Organization and regulation
See also: Theory of the firm
Most legal jurisdictions specify the forms of ownership that a
business can take, creating a body of commercial law for each type.
The major factors affecting how a business is organized are usually:
The size and scope of the business firm and its structure, management,
and ownership, broadly analyzed in the theory 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 a stock market or
to be owned by a wide range of people will often be required to adopt
a specific legal form to do so.
The sector and country. Private profit-making businesses are different
from government-owned bodies. In some countries, certain businesses
are legally obliged to be organized in certain ways.
Tax advantages. Different structures are treated differently in tax
law and may have advantages for this reason.
Disclosure and compliance requirements. 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 of shareholders,
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 from personal liability for the debts
and obligations of the entity, which is legally treated as a separate
"person". This means that unless there is misconduct, the owner's own
possessions are strongly protected in law if the business does not
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 a sole 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
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-called double
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 an initial 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 public LLC's that sell
units (sometimes also called shares), and other more exotic entities
as well, such as, for example, real estate investment trusts in the
USA, and unit trusts in the UK. A general partnership cannot "go
Main article: Corporate law
Offices in the
Los Angeles Downtown 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. The
Code of Hammurabi
Code of Hammurabi dates back
to about 1772 BC for example, and contains provisions that relate,
among other matters, to shipping costs and dealings between merchants
and brokers. The word "corporation" derives from the Latin corpus,
meaning body, and the
Maurya Empire in Iron-Age India accorded legal
rights to business entities.
In many countries, it is difficult to compile all the laws that can
affect a business into a single reference source. Laws can govern
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 as unions, 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,
broadcasting, aviation, and health care providers. Environmental
regulations are also very complex and can affect many businesses.
Mexican Stock Exchange
Mexican Stock Exchange in Paseo de la Reforma, Mexico City
When businesses need to raise money (called capital), they sometimes
offer securities for sale.
Capital may be raised through private means, by an initial public
offering or IPO on a stock exchange, or in other ways.
Major stock exchanges include the Shanghai Stock Exchange, Singapore
Exchange , Hong Kong Stock Exchange,
New York Stock Exchange
New York Stock Exchange and
NASDAQ (the USA), the
London Stock Exchange
London Stock Exchange (UK), the Tokyo Stock
Exchange (Japan), and
Bombay Stock Exchange
Bombay 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.
Main article: Intellectual property
Businesses often have important "intellectual property" that needs
protection from competitors for the company to stay profitable. This
could require patents, copyrights, trademarks, or preservation of
trade 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 international treaties
concerning 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 employee's
interactions with stakeholders, and competitors.
A trade union (or labor union) is an organization of workers who 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 better working
conditions. The trade union, through its leadership, bargains with the
employer on behalf of union members (rank and file members) and
negotiates labor contracts (collective bargaining) with employers. The
most common purpose of these associations or unions is "maintaining or
improving the conditions of their employment". This may include
the negotiation of wages, work rules, complaint procedures, rules
governing hiring, firing, and promotion of workers, benefits,
workplace safety and policies.
Business and economics portal
Main article: Outline of business
List of accounting topics
Business law topics
Change management analyst
List of economics topics
List of finance topics
List of international trade topics
Job creation program
List of company registers
List of largest employers
List of oldest companies
Lists of companies
Management information system
List of production topics
List of marketing topics
List of real estate topics
Types of business entity
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