Business is simply an economic activity which involves the acquisition, production, exchange or sale of products and services for a particular reason to make profits and meet the requirements of clients. Business enterprises can either be private profit or non-private profit organizations that work towards achieving a social cause or profit. The products or services extended by a business concern can be either tangible or non-tangible assets. Some of the tangible aspects of a business concern include products and services, which are owned and controlled by the business concern itself. Non-tangible aspects of a business concern include accounts-keeping, information technology, finance and marketing.
Basically, business activities are driven by three main factors namely profit, expansion and the alignment of resources with the defined objectives of the enterprise. The profit motive of a business organization is to maximize the net income of the enterprise through efficient sales, production and marketing of its products and/or services. On the other hand, expansion drives a business organization to take on new customers, establish new manufacturing capacity, improve the quality and productivity of products and/or services offered, acquire other raw materials and perform research and development activities required for the enterprise. All of these contribute to achieving the objectives of the business concern. It is also essential to determine the alignment of resources with the defined objectives of the organization in order to achieve the maximum level of profitability. All of these factors have direct or indirect influences on the development of a business organization.
Business enterprises engage in the following kinds of economic activities: production, distribution, processing, marketing and consumption of goods or services. Production involves the process of producing a surplus, converting raw material into goods and turning finished goods into useful commodities. Distribution includes the transportation of finished goods to various destinations. Processing involves the transformation of raw materials into useful commodities that are ready to be marketed. Marketing uses the power of advertising to persuade other people to buy the products and services of a business concern.
Business corporations may be classified as partnerships or corporations. A partnership is formed between two or more individuals. Partnerships may be limited or unrestricted. Limited partnerships are formed between limited liability companies. Unlimited partnerships are formed between individuals or entities.
There are different ways in which a business can be classified as a partnership or corporation. When a partnership is formed, one partner usually owns the other partner’s shares and in the case of a limited partnership, one partner and one debtor own the other partner’s shares and in the case of a corporation, one shareholder and one debtor own the other shareholder’s shares. In the case of a corporation, the corporation itself is the owner of the entire corporation. The debts of the corporation are considered personal assets. These debts cannot be transferred to another person. Corporate debts are considered the property of the corporation and are subject to taxation according to the nature of the business debts.
Unlike personal debts, which can be distributed among the partners, corporate debts are often kept by the corporation. Therefore, in a partnership, only one partner usually owns all of the partnership’s personal assets. There are a couple of exceptions to this principle. Under limited partnerships, where one partner is considered the general partner and all partners are limited partners, that partner is responsible for the investment decisions and any related parties. The same principle applies for corporations where one shareholder owns all of the corporation’s shares and is responsible for making the final investment decisions.
In a partnership, there is one owner and there may not be a partner. There are four basic types of partnerships. First is the proprietorship. In a partnership that has no name it is called a proprietorship. Second is the limited partnership. In this type of partnership, there is only one owner and the partnership is considered to be a partnership for tax purposes, even if there is no partnership debt.
Fourth is the c corporation. In a corporation, there are two partners and the partnership is considered a corporation. Fifth, there is the partnership estate. This is the least common type of business structure and, in this case, there are no partners and therefore, the partnership is treated as a corporation. All of the above rules affect partnerships and therefore should be carefully reviewed prior to implementation.