What is a Business?
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.
The term business also refers to the efforts and activities undertaken by individuals to produce and sell goods and services for profit.
KEY TAKEAWAYS
- A business is defined as an organization or enterprising entity engaged in commercial, industrial, or professional activities.
- Businesses can be for-profit entities or non-profit organizations.
- Business types range from limited liability companies to sole proprietorships, corporations, and partnerships.
- Some businesses run as small operations in a single industry while others are large operations that spread across many industries around the world.
Understanding a Business
The term business often refers to an entity that operates for commercial, industrial, or professional reasons. The concept begins with an idea and a name, and extensive market research may be required to determine how feasible it is to turn the idea into a business.
Businesses often require business plans before operations begin. A business plan is a formal document that outlines the company's goals and objectives and lists the strategies and plans to achieve these goals and objectives. Business plans are essential when you want to borrow capital to begin operations
Determining the legal structure of the business is an important factor to consider, since business owners may need to secure permits and licenses and follow registration requirements to begin legal operations. Corporations are considered to be juridical persons in many countries, meaning that the business can own property, take on debt, and be sued in court.
A good name is often one of the most valuable assets of a business, so it's important that business owners choose their name wisely. Most businesses operate to generate a profit, commonly called for-profit. However, some businesses that have a goal to advance a certain cause without profit are referred to as not-for-profit or nonprofit. These entities may operate as charities, arts, culture, educational, and recreational enterprises, political and advocacy groups, or social services organizations.
Business activities often include the sale and purchase of goods and services. Business activity can take place anywhere, whether that's in a physical storefront, online, or on the roadside. Anyone who conducts business activity with financial earnings must report this income to the Bureau of Internal Revenue (BİR) or Internal Revenue Service (IRS).
A company often defines its business by the industry in which it operates. For example, the real estatebusiness, advertising business, or mattress production business are examples of industries. Business is a term often used to indicate transactions regarding an underlying product or service. For example, ExxonMobil conducts its business by providing oil.
Types of Businesses
There are many ways to organize a business, and there are various legal and tax structures that correspond with each. Businesses are commonly classified and generally structured as:
- Sole Proprietorship: 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.
- Partnership: 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.
- Corporation: 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 Company (LLC): 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
Business Sizes
Small Businesses
Small owner-operated companies are called small businesses. Commonly managed by one person or a small group of people with less than 100 employees, these companies include family restaurants, home-based companies, clothing, books, and publishing companies, and small manufacturers.9 As of 2021, 33.2 million small businesses in the United States with 61.7 million employees were operating.
The Small Business Administration (SBA) uses the number of employees working at a company and its annual revenue to formally define a small business. For 229 industry sectors, from engineering and manufacturing to food service and real estate, the SBA sets sizing standards every five years.
Businesses that meet the standards of the SBA can qualify for loans, grants, and "small business set-asides," contracts where the federal government limits competition to help small businesses compete for and win federal contracts.
Mid-Sized Enterprises
There is no definitive specification in the U.S. to define a mid-sized or medium-sized company. However, when large U.S. cities such as Philadelphia, Baltimore, and Boston evaluate the landscape of operating businesses, a medium-sized company is defined as one with 100 to 249 employees or $10 million to less than $1 billion in annual gross sales.
Large Businesses
Large businesses commonly have 250 or more employees and garner more than $1 billion in gross receipts.13 They may issue corporate stock to finance operations as a publicly-traded company.
Large enterprises may be based in one country with international operations. They are often organized by departments, such as human resources, finance, marketing, sales, and research and development.
Unlike small and mid-sized enterprises, owned by a person or group of people, large organizations often separate their tax burden from their owners, who usually do not manage their companies but instead, an elected board of directors enacts most business decisions.
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.
Credit and Reference to: Investopedia (https://www.investopedia.com/terms/b/business.asp)
Being an Entrepreneur
Being an Entrepreneur
Being an entrepreneur is a journey filled with highs and lows, challenges, and rewards. Life as an entrepreneur is characterized by several key elements:
1. Passion and Purpose: Entrepreneurs often start their ventures based on a deep passion or a sense of purpose. Whether it's solving a problem, creating a product, or offering a service, this passion is the driving force behind their commitment.
2. Risk and Uncertainty: Entrepreneurship is inherently risky. It involves stepping into the unknown, taking calculated risks, and being prepared to face uncertainty. The fear of failure is a constant companion, but it's also a source of motivation.
3. Innovation and Creativity: Entrepreneurs are often at the forefront of innovation. They come up with new ideas, products, or solutions that disrupt existing markets or create entirely new ones. This requires creativity and a willingness to think outside the box.
4. Resilience: Life as an entrepreneur is far from a smooth ride. There will be setbacks, rejections, and moments of self-doubt. Resilience is crucial to bounce back from these challenges and keep moving forward.
5. Adaptability: The business landscape is ever-changing. Successful entrepreneurs are adaptable and willing to pivot when necessary. They stay attuned to market trends and customer feedback, adjusting their strategies accordingly.
6. Hustle and Hard Work: Entrepreneurship demands hard work and dedication. Long hours, multitasking, and the willingness to get your hands dirty are common. The famous saying, "Entrepreneurship is living a few years of your life like most people won't, so that you can spend the rest of your life like most people can't," holds true.
7. Network and Relationships: Building a strong network is crucial for entrepreneurs. It's not just about what you know but also who you know. Relationships with mentors, investors, and other entrepreneurs can provide valuable guidance and support.
8. Financial Management: Entrepreneurs often have to manage their finances meticulously, especially in the early stages when resources may be limited. They need to balance budgets, seek funding when needed, and ensure the sustainability of their ventures.
9. Impact and Fulfillment: Many entrepreneurs find great fulfillment in the impact they create. Whether it's improving people's lives, contributing to a cause, or simply building a successful business, this sense of achievement is a powerful motivator.
10. Freedom and Responsibility: Entrepreneurship offers the freedom to be your own boss, set your own direction, and make important decisions. However, it also comes with immense responsibility for the success or failure of the venture.
In summary, life as an entrepreneur is a dynamic, challenging, and rewarding journey. It requires a unique blend of passion, perseverance, and adaptability to navigate the complexities of the business world and bring innovative ideas to life.
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