A business is a physical entity where individuals work as part of a cooperative group. In a business, individuals work collectively to either make and sale goods or services to customers. Others also purchase the goods and services sold by the business.
Businesses may not be what they seem at first glance. Most people believe that a business consists of a corporation with a board of directors. However, there are several variations of this definition. A business may be operated by one or more people. Additionally, the business may be composed of one or more entities such as a partnership, sole proprietorship, and corporation.
Examples of a business comprised of multiple entities include partnerships, sole proprietorships, and corporations. Partnerships are formed between two or more business owners who share equal liability and ownership in the partnership. For example, Bob and Jane own a contracting company. Each year, they pay into the partnership a predetermined amount of money called the principle, and they and their partners form a new corporation called Bob’s Contracting Company that owns and operates the contracting company.
Sole proprietorships are another type of business structure. In these businesses, the only people involved are the owners. There are many businesses that are comprised of just one person – such as an attorney. The most popular form of this business structure is called the partnership. In a partnership, two or more people share the same resources, profits, and liabilities while working under the same rules and regulations.
A corporation is a legal entity separate from its owner. Unlike a partnership, a corporation is created by the government. Unlike sole proprietorships, there are no restrictions on who can be the general manager or director of a corporation. However, in order to protect their legal rights, owners of corporations usually agree to share in the expenses and losses of the corporation. This means that each partner will contribute their respective percentage of the business’s income, liabilities, and assets to the business. If the business becomes bankrupt, each partner is individually liable for their share of the debts of the business.
The three business structures above are the most common types of businesses that exist today. While many businesses are successful, many fail because of lack of proper planning. Whether the business will be successful or not depends on the kind of people who own it, the nature of their products or services, and their management plans. To be able to run a successful business, owners must think carefully about what kind of structure will work best for their business.