A business is defined simply as an enterprise or group of enterprises, whether commercial or service oriented, operating under the same framework and focused on a particular area. A business is also characterized as the collective efforts and actions of people to make and sell various services and products for profit. A business may be privately owned and operated, or may be publicly owned and operated. Some types of businesses include: retail stores, insurance companies, communications or electric utility companies, banking, manufacturing, mining, oil refineries, manufacturing, art galleries, brokers, retail clothing, publishing, and political campaign contributions.
Private corporations are formed for the benefit of its shareholders, rather than for the purpose of serving as a way to accumulate wealth. Corporations are generally classified as either limited or public in nature. Limited liability companies (LLCs) are corporations that operate by using a particular set of organizational guidelines such as limited liability. Public corporations are organizations that can exercise free trading, borrowing, and lending privileges.
The most common type of business structure is a limited liability company. This business structure allows owners to protect themselves against lawsuits by only being liable for those damages that do not exceed their invested assets. These limits help prevent the business from having to spend too much money fighting a lawsuit. Limited liability companies also limit personal liability to the shareholders. Because they are not publicly traded, they are less vulnerable to share price movements and capital gains and debt obligations.
Another business structure that is less common is a partnership. A partnership combines two or more individuals or groups into a business endeavor where one party is called a partner and the other party is called a member. Partnerships can be a good choice for new businesses, as they provide the opportunity to work with skilled professionals and have the benefits of one unified business entity. However, a partnership can prove difficult to set up, can be complicated to monitor, and is more difficult to finance.
Examples of business enterprises that utilize general partnerships are limited liability partnerships, general partnerships, and limited liability companies. Limited liability partnerships operate similarly to general partnerships except that an individual will bear the liability for the partners’ debts. General partnerships allow business owners to control many aspects of their business without making personally liable for all business debts. In general, business owners maintain a controlling interest in the partnership’s business, but do not bear the liability for all of the partnership’s debts. Limited liability partnerships are managed by an outside board of directors and require no meetings, voting, or other involvement from the business owners.
One of the biggest disadvantages of owning a business involves taxes. If you do not deduct your business expenses, you will owe thousands of dollars in taxes. This will affect the viability of your business, as well as the future profits you might realize. Another disadvantage is that you cannot use your personal assets to pay off your business debts. You will have to obtain financing from an external source.
One of the biggest differences between a sole proprietorship and a partnership is that the sole proprietor is legally liable for all business debts. This means that should you not be able to pay the bills, your sole proprietorship can be brought into disrepute. As with any business, the success or failure of a venture largely relies on the owner’s ability to pay his or her personal debts. It can be a risky business to put your family’s financial well being at risk, so it is best to avoid this type of business structure whenever possible. In addition, in the case of sole proprietorships, there can often be significant tax advantages for the owner.
The final two main types of business organizations are Corporation and S-Corporation. A corporation is a separate legal entity from its owners. The business can benefit from advantages offered by corporations, such as limited liability. However, there are tax advantages as well. The profit or loss of a corporation is not taxed unless the entire business is sold, which is not often the case with sole proprietorships or other business structures. A business can also lose its liability for corporate taxes if it chooses to incorporate itself as a corporation.