A business is bacally defined as an enterprising organization or entity actively engaged in commercial, corporate, or industrial activities for profit. Businesses may be either for-profit or non-profitable organizations that conduct purely for the benefit of its members or others. The activities of a business are the products of its imagination and hard work. A business owner can be an individual, a corporation, a partnership, a joint venture, an organization, or a group. Business enterprises may be locally or internationally based with a stake through ownership, investment, shares, loans, or business transactions.
Some businesses are sole proprietorships, meaning that the business owns all the assets while exercising total control over the management and operation of the enterprise. Partnerships are partnerships where one or more partners share in the profits. In a partnership, each partner normally has a profit motive, but there are no restrictions on partners sharing in the profits. A corporation is a form of partnership in which the principal shareholder or owners have voting rights attached to assets, shares, and profits of the company.
Many people confuse sole proprietorships and partnerships with limited liability partnerships (LLPs). These two business structures have important differences and should be considered carefully by any business planning prior to investing time, energy and money in them. For example, an LLC is only open for business owners who are the sole members. Limited liability partnerships are open for anyone who owns a majority interest in the partnership but does not have the same rights as the principal owner.
Both sole proprietorship and partnership are registered with the state as corporations. Sole proprietorships are treated as separate legal entities from the people who own them. They are not, however, required to register with the state as businesses. All United States citizens are automatically entitled to file a tax return as a corporation and are thus treated as corporation owners. Partnerships are subject to taxation at the personal level, although partners may have their personal taxes deferred until they pay the corporate taxes.
The four key takeaways include: effective organization, financial efficiency, structure, and centralization. An effective organization is necessary for a successful business activity. The level of organizational efficiency enables a business to maximize profit through minimizing cost and waste and maximizing revenues at all levels. A financial efficiency strategy allows an organization to reduce costs while maintaining adequate revenue to support growth.
On the other hand, a good structure enables partners to have a vested interest in the growth and management of the company. A well-built business structure provides a means of centralization of resources for better overall management and control. Limited liability partnerships (LLPs) and corporations provide additional advantages that are particularly useful to new ventures. Limited liability partnerships may be used to create a hybrid entity structure, a structure that combines the benefits of a partnership and the advantages of a corporation.