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In [[economics]], a '''business''' is a legally recognized organizational entity existing within an [[economic freedom|economically free]] country designed to sell [[good (economics and accounting)|good]]s and/or [[Service (economics)|services]] to [[consumer]]s or other [[businesses]], usually in an effort to generate [[profit]]. |
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In predominantly [[capitalist]] economies, where most businesses are privately owned, businesses are typically formed to earn [[profit]] and grow the personal [[wealth]] of their owners. The owners and operators of a business have as one of their main objectives ''the receipt or generation of a [[financial return]]'' in exchange for their [[Work (project management)|work]] and their acceptance of [[risk]]. Notable exceptions to this rule include [[cooperative]] businesses and [[government]] institutions. This model of business functioning is contrasted with [[socialistic]] systems, which involve either government, public, or worker ownership of most sizable businesses. |
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The [[etymology]] of "business" relates to the state of being busy either as an individual or society as a whole, doing commercially [[viable]] and profitable work. The term "business" has at least three usages, depending on the scope — the singular usage (above) to mean a particular [[company]] or [[corporation]], the generalized usage to refer to a particular [[market sector]], such as "the record business," or the broadest meaning to include all activity by the community of suppliers of goods and services. However, the exact definition of business, like much else in the [[philosophy of business]], is a matter of debate. <!-- This article is concerned primarily with the first definition of individual businesses, but also contains links to general business and management topics, in the sense of the second definition.--> |
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[[Business Studies]], the study of the [[management]] of individuals organizing to maintain collective [[Productivity (economics)|productivity]] toward accomplishing particular creative and [[product (business)|productive]] goals (usually to generate profit), is taught as an [[academia|academic]] subject in many schools. |
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==Basic forms of ownership== |
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Although forms of business ownership vary by country and local government, there are several common forms of business ownership: |
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*'''Sole proprietorship:''' A [[sole proprietorship]] is a business owned by one person. The owner may operate on his or her own or may employ others. The owner of the business has total and unlimited personal liability of the debts incurred by the business. |
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*'''Partnership:''' A [[partnership]] is a form of business in which two or more people operate for the common goal of making profit. Each partner has total and unlimited personal liability of the debts incurred by the partnership. There are three typical classifications of partnerships: [[general partnership]]s, [[limited partnership]]s, and [[limited liability partnership]]s. |
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*'''Corporation:''' A business [[corporation]] is a for-profit, [[limited liability]] entity that has a separate legal personality from its members. A corporation is owned by multiple [[shareholder]]s and is overseen by a [[board of directors]], which hires the business's managerial staff. |
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*'''Cooperative:''' Often referred to as a "Co-Op business" or "Co-Op", a [[cooperative]] is a for-profit, limited liability entity that differs from a corporation in that it has [[members]], as opposed to shareholders, who share decision-making authority. Cooperatives are typically classified as either [[consumer cooperative]]s or [[worker cooperative]]s. Cooperatives are fundamental to the ideology of [[economic democracy]]. |
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==Classifications== |
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[[Image:View of Wall Street.jpg|thumb|250px|[[Wall Street]], [[Manhattan]] is the location of the [[New York Stock Exchange]] and is often used as a [[symbol]] for the world of business.]] |
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[[Image:Commercial st.jpg|thumb|250px|Commercial Street, [[Bangalore]]. [[India]]]] |
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There are many types of businesses, and, as a result, businesses can be classified in many ways. One of the most common focuses on the primary profit-generating activities of a business: |
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* [[Manufacturer]]s produce [[product (business)|products]], from [[raw material]]s or component parts, which they then sell at a profit. Companies that make physical [[goods]], such as cars or pipes, are considered manufacturers. |
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* [[Service Sector|Service businesses]] offer intangible goods or services and typically generate a profit by charging for labor or other services provided to government, other businesses or [[consumers]]. Organizations ranging from house decorators to consulting firms to restaurants and even to entertainers are types of service businesses. |
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* [[Retail]]ers and [[distribution (business)|Distributors]] act as middle-men in getting goods produced by manufacturers to the intended consumer, generating a profit as a result of providing sales or distribution services. Most consumer-oriented stores and catalogue companies are distributors or retailers. ''See also:'' [[Franchising]] |
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* [[Agriculture]] and [[mining]] businesses are concerned with the production of raw material, such as plants or minerals. |
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* [[Financial]] businesses include banks and other companies that generate profit through investment and management of [[capital]]. |
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* Information businesses generate profits primarily from the resale of intellectual property and include movie studios, publishers and packaged software companies. |
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* [[Utilities]] produce public services, such as heat, electricity, or sewage treatment, and are usually government chartered. |
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* [[Real estate]] businesses generate profit from the selling, renting, and development of properties, homes, and buildings. |
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* [[Transport]]ation businesses deliver goods and individuals from location to location, generating a profit on the transportation costs |
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There are many other divisions and subdivisions of businesses. The authoritative list of business types for North America (although it is widely used around the world) is generally considered to be the [[North American Industry Classification System]], or NAICS. The equivalent European Union list is the NACE. |
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==Organization== |
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Most businesses must accomplish similar functions regardless of size, legal structure or industry. These functions are often organized into departments. Common departments include (but are not limited to): |
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; [[Accountancy|Accounting]] : Typically responsible for [[financial reporting]], financial controls and the raising of the capital necessary to run the business. |
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; [[Human Resources]] : Typically responsible for hiring, firing, payroll, benefits, etc. |
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; Marketing and sales : responsible for selling the business' goods or services to the customer and for managing the relationships with the customer |
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::; [[Marketing]] : Typically responsible for promoting interest in, and generating demand for, the business' products or services, and [[positioning]] them within the market |
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::; [[Sales]] : finding likely purchasers and obtaining their agreement (known as a [[contract]]) to buy the business' products or services |
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; Operations : makes the product or delivers the service |
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::; [[Production, costs, and pricing|Production]] : produces the raw materials into the delivered goods, if they require processing |
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::; [[Customer service]] : supports customers who need help with the goods or services |
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; [[Procurement]] : responsible for acquiring the goods and services necessary for the business. Sometimes organized as: |
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::; [[Strategic sourcing]] : determines the business' needs and plans for acquiring the necessary raw materials and services for the business |
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::; Purchasing : processes the [[purchase order]]s and related transactions |
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; [[Research and Development]] : tests to create new products and to determine their viability (e.g. [[pilot plant]]s) |
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; [[Information Technology]] : manages the business' computer and data assets |
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; Communications/Public Relations : responsible for communicating to the outside world |
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; Administration : provides administrative support to the other departments (such as typing, filing, etc.) |
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; [[Internal Audit]] : an independent control function typically accountable to the Board of Directors for reporting on the proper functioning of the other departments |
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[[Management]] is sometimes listed as a "department" but typically refers to the top level of leadership within the business regardless of their functional role. |
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==Management== |
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{{Expand-section|date=August 2007}} |
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The study of the efficient and effective [[Business Operations|operation of a business]] is called [[management]]. The main branches of management are [[finance|financial management]], [[marketing|marketing management]], [[organizational studies|human resource management]], [[strategic management]], [[manufacturing|production management]], service management, [[management information systems|information technology management]], and [[business intelligence]]. |
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==Government regulation== |
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{{Cleanup-section|date=August 2007}} |
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{{globalize}} |
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[[Image:London.bankofengland.arp.jpg|thumb|250px|The Bank of England in [[Threadneedle Street]], [[London]], [[England]].]] |
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Most legal [[jurisdiction]]s specify the forms of ownership that a business can take, creating a body of [[commercial law]] for each type. |
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===Organizing a business=== |
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The major factors affecting how a business is organized are usually: |
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* The size and scope of the business, and its anticipated management and ownership. 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 partnerships or (more commonly) corporations. In addition a business which 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. |
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* 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 certain ways. |
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* [[Limited liability]]. Corporations, limited liability partnerships, and other specific types of business organizations protect their owners 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 so protected. |
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* Tax advantages. Different structures are treated differently in tax law, and may have advantages for this reason. |
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* Disclosure and compliance requirements. Different business structures may be required to make more or less information public (or reported to relevant authorities), and may be bound to comply with different rules and regulations. |
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Many businesses are operated through a separate entity such as a corporation, limited partnership or limited liability company. 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 [[shareholder]]s, 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 succeed. |
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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. |
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A single person who owns and runs a business is commonly known as a ''sole proprietor'', whether he or she owns it directly or through a formally organized entity. |
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A few relevant factors to consider in deciding how to operate a business include: |
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#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. |
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#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. |
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#In most countries, there are laws which treat small corporations differently than 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. |
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#In order to "go public" (sometimes called [[Initial public offering|IPO]]) -- which basically means to allow a part of the business to be owned by a wider range of investors or the public in general -- you must organize a separate entity, which is usually required to comply with a tighter set of laws and procedures. Most public entities are corporations that have sold shares, but increasingly there are also public LLCs that sell units (sometimes also called shares), and other more exotic entities as well (for example, [[REIT]]s in the USA, [[Unit Trust]]s in the UK). However, you cannot take a general partnership "public." |
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===Commercial law=== |
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Most commercial transactions are governed by a very detailed and well-established body of rules that have evolved over a very long period of time, it being the case that governing trade and commerce was a strong driving force in the creation of law and courts in Western civilization. |
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As for other laws that regulate or impact businesses, in many countries it is all but impossible to chronicle them all in a single reference source. There are laws governing treatment of labor and generally relations with employees, safety and protection issues ([[OSHA]] or [[Health and Safety]]), anti-discrimination laws (age, gender, disabilities, race, and in some jurisdictions, sexual orientation), minimum wage laws, [[Trade union|union]] laws, workers compensation laws, and annual vacation or [[working hour]]s time. |
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In some specialized businesses, there may also be licenses required, either due to special laws that govern entry into certain trades, occupations or professions, which may require special education, or by local governments who just want your money. Professions that require special licenses run the gamut from law and medicine to flying airplanes to selling liquor to radio broadcasting to selling investment securities to selling used cars to roofing. Local jurisdictions may also require special licenses and taxes just to operate a business without regard to the type of business involved. |
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Some businesses are subject to ongoing special regulation. These industries include, for example, public utilities, investment securities, banking, insurance, broadcasting, aviation, and health care providers. Environmental regulations are also very complex and can impact many kinds of businesses in unexpected ways. |
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===Capital=== |
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When businesses need to raise money (called '[[Capital (economics)|capital]]'), more laws come into play. A highly complex set of laws and regulations govern the offer and sale of investment [[securities]] (the means of raising money) in most Western countries. These regulations can require disclosure of a lot of specific financial and other information about the business and give buyers certain remedies. Because "securities" is a very broad term, most investment transactions will be potentially subject to these laws, unless a special exemption is available. |
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Capital may be raised through private means, by public offer (IPO) on a [[stock exchange]], or in many other ways. Major stock exchanges include the [[New York Stock Exchange]] and [[Nasdaq]] (USA), the [[London Stock Exchange]] (UK), the [[Tokyo Stock Exchange]] (Japan), and so on. Most countries with capital markets have at least one. |
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Business that have gone "public" are subject to extremely detailed and complicated regulation about their internal governance (such as how executive officers' compensation is determined) and when and how information is disclosed to the public and their shareholders. 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. |
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As noted at the beginning, it is impossible to enumerate all of the types of laws and regulations that impact on business today. In fact, these laws have become so numerous and complex, that no business lawyer can learn them all, forcing increasing specialization among corporate attorneys. It is not unheard of for teams of 5 to 10 attorneys to be required to handle certain kinds of corporate transactions, due to the sprawling nature of modern regulation. Commercial law spans general corporate law, employment and labor law, healthcare law, securities law, M&A law (who specialize in acquisitions), tax law, ERISA law (ERISA in the United States governs employee benefit plans), food and drug regulatory law, intellectual property law (specializing in copyrights, patents, trademarks and such), telecommunications law, and more. |
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In Thailand, for example, it is necessary to ''register'' a particular amount of capital for each employee, and pay a fee to the government for the amount of capital registered. There is no legal requirement to prove that this capital actually exists, the only requirement is to pay the fee. This is a typical example of a corrupt government using its power to create laws in order to steal money. Overall, processes like this are detrimental to the development and GDP of a country, but often exist in "feudal" developing countries. |
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===Intellectual property=== |
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Businesses often have important "[[intellectual property]]" that needs protection from competitors in order for the company to stay profitable. This could require patents or copyrights 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 [[treaty|treaties]] concerning intellectual property, and thus companies registered in these countries are subject to national laws bound by these treaties. |
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===Exit plans=== |
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Businesses can be bought and sold. Business owners often refer to their plan of disposing of the business as an "exit plan." Common exit plans include [[IPO]]s, [[Management buyout|MBO]]s and mergers with other businesses. |
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== See also == |
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: ''Main lists: [[List of basic business topics]] and [[List of business topics]]'' |
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This encyclopedia includes over 1600 business and economics articles, so not all appear listed here. This lists some of the main branches of business. For more specific topics, look at the various sublists. |
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{{top}} |
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*[[Accounting]] |
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**[[List of accounting topics]] |
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*[[Advertising]] |
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*[[Banking]] |
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*[[Big business]] |
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*[[Business broker]] |
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*[[Business ethics]] |
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**[[List of business ethics, political economy, and philosophy of business topics]] |
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**[[Social responsibility]] |
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*[[Business hours]] |
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*[[Business school]]s |
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*[[Capitalism]] |
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*[[Commerce]] |
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*[[Commercial law]] |
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**[[List of business law topics]] |
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*[[Cooperative]] |
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*[[Corporation]] |
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*[[Corporate law]] |
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*[[Economics]] |
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**[[Economic democracy]] |
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**[[Financial economics]] |
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**[[List of economics topics]] |
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*[[Electronic commerce]] |
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**[[E-business]] |
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*[[Entrepreneurship]] |
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*[[Finance]] |
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**[[List of finance topics]] |
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{{mid}} |
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*[[Franchising]] |
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*[[Government ownership]] |
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*[[Human Resources]] |
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**[[List of human resource management topics]] |
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*[[Industry]] |
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*[[Intellectual property]] |
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*[[International trade]] |
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**[[List of international trade topics]] |
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*[[Insurance]] |
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*[[Investment]] |
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*[[Limited liability]] |
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*[[Management]] |
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**[[List of management topics]] |
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*[[Management information systems]] |
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**[[List of information technology management topics]] |
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*[[Manufacturing]] |
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**[[List of production topics]] |
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*[[Marketing]] |
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**[[List of marketing topics]] |
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*[[Organizational studies]] |
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*[[Partnership]] |
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*[[Sole proprietorship]] |
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*[[Real Estate]] |
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**[[List of real estate topics]] |
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*[[Small business]] |
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*[[Strategic Management]] |
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*[[Strategic Planning]] |
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{{bottom}} |
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==External links== |
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{{sisterlinks|Business}} |
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<!--interwiki links follow--> |
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<!-- '''Unlimited Liability:''' a situation in which owners of a business are liable for all the debts that the business may incur. |
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'''Limited Liability:''' a situation in which the liability of the owners of a business is limited to the full paid-up value of the share capital. --> |
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=== General === |
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*[http://www.bbb.org/ Better Business Bureau] US & Canada |
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*[http://www.doingbusiness.org/ Doing Business project] |
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[[Category:Business| ]] |
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[[arc:ܫܘܓܠܐ]] |
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[[cs:Podnikání]] |
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[[de:Betriebswirtschaftslehre]] |
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[[et:Ettevõte]] |
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[[el:Επιχείρηση]] |
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[[es:Negocio]] |
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[[fr:entreprise]] |
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[[ga:Gnó]] |
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[[he:עסקים]] |
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[[hi:व्यापार]] |
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[[lv:Uzņēmējdarbība]] |
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[[mn:Бизнес]] |
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[[ja:ビジネス]] |
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[[ko:사업]] |
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[[ps:سوداګري]] |
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[[pl:Przedsiębiorstwo (ekonomia)]] |
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[[pt:Negócio]] |
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[[tr:İşletme]] |
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[[uk:Бізнес]] |
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[[yi:ביזנעס]] |
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[[zh:工商业]] |
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Revision as of 14:14, 5 January 2008
- For other uses, see business (disambiguation) or The Business
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