Key words : Business , sole proprietorship, Corporation , Partnership , LLC .
Introduction :
The term Businesshttps://en.wikipedia.org/wiki/Business refers to an organization or enterprising entity engaged in commercial, industrial, or professional activities. It is the efforts and activities undertaken by individuals to produce and sell goods and services for profit. The purpose of a business organization is to organize all economic production of goods and services. The main aim of Business organizations is to earn profit . Businesses range in scale and scope from Sole proprietorships to large corporations .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.
Business Concept:
A business concept describes and clearly defines a new idea for a business initiative, whether that be creating a new company or producing a new product for the consumer market. A successful business concept lays out the groundwork for why you have created the idea, what it can solve, who the demographic is and whether it’s beneficial enough to invest in it.
An important component of a business concept is the business model, which details the finances of the concept and how to make it profitable. No matter the business concept, it’s essential to outline the framework for revenue growth, like how much the product or service might cost and the necessary resources to ensure that it’s financially successful.
Objective Of The Business:
The basic objective of business is its going-on concept and performance of activities which aims to survive in the long run. While most people argue that profit making is the core objective of every business. Few have come up with the new underlying objective.
- Traditional Concept:
The traditional concept states that the business aims to make a profit through the production and marketing of products. Also, Products can be of various types. Furthermore, The traditional concept states that the objective of the business is to earn profit through the production and marketing of products. For example, the main objective of the business of material goods, services, ideas, information, etc. is to get maximum profit according to the traditional concept. So to sum up we can say that according to the traditional concept, business exists only to earn profits by providing the goods and services to the customers.
- Modern Concept :
Consumer satisfaction is the focal point of the modern concept of business. The modern concept states that a business earns profit through customer satisfaction. Business without consumers is not business. Also, It develops long-term relations with customers. The business should earn profit with social responsibility. It should care about the welfare of society and consumers. it must work within the law. Furthermore, Profits can exist made by maintaining social accountability. It attempts to incorporate every aspect of human civilization. It sees modern business as a socio-economic institution that is always responsible to society. So to sum up we can say that according to the modern concept, the underlying objective of every business is customer satisfaction as this is what results in most profits. If the customer is satisfied, business excels.
Types Of Business:
Businesses can be classified into but are not limited to 4 types. These are –
- Manufacturing
Manufacturing businesses are the producers who develop the product and sell it either directly to the customer or the middlemen to conduct sales. Examples of manufacturing businesses are steel factories, plastic factories, etc.
- Service
This type of business deals in selling intangible goods to the consumers. Unlike tangible goods, services cannot be stored or separated from the provider.
Service firms offer professional services, expertise, commission-based promotions, etc. Examples include salons, schools, consultancy etc.
- Merchandising
Merchandising is a middlemen business strategy where the business buys products from a manufacturer, wholesaler, or other partners, and sells the same at the retail price. It is usually known as a ‘buy and sell’ business as they make profits by selling the products at a price higher than their cost price.
Examples of a merchandising business are grocery stores, supermarkets, distributors etc.
- Hybrid
Hybrid businesses have the characteristics of two or more types of businesses explained above. For example, a restaurant develops its own dishes (manufacturing), sells the products like cold drinks which are manufactured by other businesses (merchandising), and provide service to the customers (service).
Forms 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.
The five characteristics of sole proprietorship are as follows:
- Sole owner of the business
- Unlimited liability
- No legal entity
- Sole decision maker
- Can wrap up the business anytime
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.
The following are the five characteristics of a partnership:
- Sharing of profits and losses
- Mutual agency
- Unlimited liability
- Lawful business
- Contractual relationship
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.
The following are the 5 characteristics of Corporations:
- Separate Legal Existence.
- Continuous Life.
- Ability to Acquire Capital.
- Transferability.
- Limited Liability.
Limited Liability Company (LLC):
LLC (Limited Liability Company) is a business structure that has become popular worldwide. In India, LLCs can be registered as Limited Liability Partnerships (LLPs) and Private or Public Limited Companies. 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.
The following are the characteristics of limited liability company :
- Separate legal existence
- Limited liability
- Flexibility in taxation
- Simplicity in operation.
This Article is written by Mamta Kochar from Smt K.G.Shah Law School during her internship with LeDroit India.
