Business

In economics, business is the social science of managing people to organize and maintain collective productivity toward accomplishing particular creative and productive goals, usually to generate profit.

The etymology of "business" refers to the state of being busy, in the context of the individual as well as the community or society. In other words, to be busy is to be doing commercially viable and profitable work.

The term "business" has at least three usages, depending on the scope — the general usage (above), the singular usage to refer to a particular company or corporation, and the generalized usage to refer to a particular market sector, such as "the record business," "the computer business," or "the business community" — the community of suppliers of goods and services.

The singular "business" can be a legally-recognized entity within an economically free society, wherein individuals organize based on expertise and skills to bring about social and technological advancement.

In predominantly capitalist economies, businesses are typically formed to earn profit and grow the personal wealth of their owners. Notable exceptions to this rule include many cooperatives, non-profit organizations, and government institutions.

In other words, 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 — that is, the expense of time, energy, and money.

However, the exact definition of business is disputable as is business philosophy; for example, most Marxists use "means of production" as a rough synonym for "business." Socialists advocate either government, public, or worker ownership of most sizable businesses. Some advocate a mixed economy of private and state-owned enterprises. Others advocate a capitalist economy where all, or nearly all, enterprises are privately owned.

Types of Businesses

There are five main types of business unit:

Sole Proprietorship: a business owned by one person. The owner may operate on their own or may employ others. The owner of the business has total and unlimited personal liability of the debts incurred by the business.

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.

Cooperative Business: (often referred to as a Co-Op business or Co-Ops) use a cooperative business structure: for-profit, limited liability, but with members of the co-op share decision-making authority. Co-Ops normally fall into three types: consumer co-ops, producer co-ops (common in agriculture) and worker-owned companies. Co-Ops are fundamental to the ideology of Economic democracy.

Private Limited Company (Ltd): a small to medium sized business that is often run by the family or the small group who own it. The owners and managers are only liable for the business up to the amount they have invested in the company, and are not liable for the debts incurred by the company unless they have signed a personal guarantee.

Public Limited Company: a business with limited liability, a wide spread of shareholders and in the UK, a share capital of over £50,000. The owners and managers are only liable for the business up to the amount they have invested in the company, and are not liable for the debts incurred by the company (unless they have signed a personal guarantee, which usually is not the case for a large corporation).

In the United States and some other countries, a limited company is known as either a corporation or a limited liability company.

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, for example:

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

Limited and Unlimited Liability

Unlimited Liability: a situation in which owners of a business are liable for all the debts that the business may incur.

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.

Organization

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):

Accounting
typically responsible for financial reporting, financial controls and the raising of the capital necessary to run the business.

Human Resources
typically responsible for hiring, firing, payroll, benefits, etc.

Marketing and sales
responsible for selling the business' goods or services to the customer and for managing the relationships with the customer

Operations
makes the product or delivers the service

Procurement
responsible for acquiring the goods and services necessary for the business. Sometimes organized as:

Research and Development
tests to create new products and to determine their viability (e.g. pilot plants)

Information Technology
manages the business' computer and data assets

Communications/Public Relations
responsible for communicating to the outside world

Administration
provides administrative support to the other departments (such as typing, filing, etc)

Internal Audit
an independent control function typically accountable to the Board of Directors for reporting on the proper functioning of the other departments

Management
is sometimes listed as a "department" but typically refers to the top level of leadership within the business regardless of their functional role.

Capital

When businesses need to raise money (called '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.

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.

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.

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.

Information Courtesy of Wikipedia, the free encyclopedia