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A business refers to an entity or organization designed to produce and provide services and goods to consumers. Businesses occur predominantly, in economies that have capitalist backgrounds. This paper looks into business as a whole entity (Downing and Clark 2).
Most businesses operate to earn profits and increase wealth, to their owners. Businesses have different forms of ownership. Certain business entities operate through private ownership, where the owner could compose of one person or a group of people. Business entities can also operate under state ownership or organizational ownership.
The term business has three uses, which depend on their scope of operation. A singular approach to the use of the term business relates to one particular organization. The generalized use relates to its use, in the market sector, which may include music businesses and other forms, such as agribusiness. The third use involves a broad use of the term that composes of all the activities done by a group of suppliers of services and goods. However, the definition of the term business involves a matter of debate, complexity and controversy of meanings.
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Other people have defined business as a commercial activity, which people do as a means of livelihood of for making profits. This definition relates to the fact that a business offers people the resources to use as they live. They derive their necessities, such as food, clothing and shelter from the business they do.
Another definition to the concept of business entails the notion that an economic system, where goods and services exchange for one another or for money. This happens based on the perceived worth of the process and procedure. In this sense, a business refers to a physical entity and a process. It entails the things that people handle when engaging in business. These things involve money and other goods and services. In relation to the process, a business entails the procedure that happens when exchanging a god for money or for another good or service. The process may entail certain rules and regulations. These include the amount of money that should go in to the process, the amount of goods present and the modes of payment (Fishman 29).
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Every business requires a form of investment. A business operates in an environment that provides customers and consumers. No business can go on without the availability of consumers or customers.
Business has different types of ownership. The first type of ownership entails sole proprietorship. This business has single ownership. This means that one person owns the business. The owner of the business may opt to employ other people, to help him run the business, or he may decide to run the business on his own. This type of business has no legal differentiation between the owner and the business entity. The owner gets all the profit, which may subject to taxation, specific to that kind of business. It has unlimited responsibility for debts and losses. All assets in the business belong to the owner, including all the debts. The sole proprietor has the freedom of using a trade or business name other than the legal name. This type of ownership has its advantages as well as disadvantages. Profits belong to the owner alone. However, sole proprietorship has a problem of raising capital, especially when starting a large business entity.
Partnerships refer to businesses owned by two or more people. They have unlimited liability to debts incurred in the business. The partnership ownership manifests itself, in three different ways, which include general partnerships, limited partnerships, and limited liability partnerships.
The third type of ownership entails corporations. Corporations manifest themselves as limited liability businesses, which have separate legal personality from membership. Businesses under corporate ownership can operate as profit or as non- profit making organizations. Corporate ownerships that operate for profit making run through the ownership of shareholders who choose a board of directors who direct the entity and employ managerial staff. They can have private ownership or government ownership.
The last business ownership involves cooperatives. Just like corporations, they operate as limited liabilities for profit or for non-profit gains. This ownership operates though its members, who have the decision-making authority in the business firm.
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Businesses have many classifications. The classification focuses on many aspects. However, the most common way of classifying business entities involves the primary profit-making activities of the business. In this regard, agriculture and mining businesses operate with the concern of producing raw materials, financial businesses make profits through investment and management of capital. Information businesses generate money from the sale of intellectual property, which includes movie studios. Other business entities include manufacturers, real estate businesses, retailers, service businesses, transportation and utilities.
Businesses operate under certain forms of management. Management refers to effective and efficient running of business operations by people accorded the responsibility of undertaking management. Management encompasses many branches that include financial management, marketing, human resource, strategic planning, production service, information technology and operations management. However, some of these have significance than others. Financial management involves the practice and procedure of ensuring that the finances of the business remain updated and validated. It involves balancing expenditure and returns of the business. This involves preparing financial statements and carrying out auditing, to ascertain that the financial operations of the business go as planned. This has importance of ensuring that the business uses funds appropriately and reduces the chances of the business going bankrupt (Caputo 78).
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Another important field of management involves the human resource management. The human resource department of a business has a significant importance to the business. This happens because human resources functions at the core of the business. Human resources run all the activities, in a business entity. Management of human resources entails the capacity of employing people with relevant and quality skills, ensuring that they have a remarkable remuneration and ensuring that the business meets the needs of the employees. It also entails making sure that the human resource performs its duties, in the best way possible.
All management functions that go on, in businesses aim at ensuring that all departments perform their duties and responsibilities. It also entails the assurance that a business entity operates without hardships caused by ill management practices.
Business entities operate through certain forms of organizations. The organization of a certain business entity depends on certain factors. First, the organization of a business entity depends on its size and scope. The size and scope of the business encompasses issues, such as the structure management, ownership and operational objectives. Small business entities tend to have a flexible organization. However, large business entities or those with broad ownership and formal structures take formal organizations. In addition to this, when a business entity requires to raise money, in a stock market, it has to adhere to certain legal organizational requirements (Downing and Clark 97).
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Business entities face certain problems in their operations. Most businesses face the problem involving capital. The access to capital forms one of the significant problems that many businesses face. This happens especially for small business entities. Small business entities have limited ways of accessing capital. This happens because they do not have the capacity to source for capital though stock exchange of securities. Most of them have limited understanding of business finance and relationship with lenders. When establishing businesses, people find cash flow, finance, insufficient sales and poor pricing of goods and services as most problematic. Another financial problem that businesses face involves problems that deal with financial statements and the use of funds. Sometimes, companies fail to come up with correct financial statements, which lead to misappropriation of funds. Businesses also face the problem of over expenditure. The persistence of these problems forces businesses to go into bankruptcy. However, in solving this problem, people have sought the assistance of experts who have vast knowledge of financial operations. They help by advising business on how they could borrow capital from banks. They also offer financial assistance, for instance auditing.
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Another problem that businesses face entails the management. Most business entities fail because of poor management functions. Poor management functions come because of incompetence, lack of management resources and ignorance of needed management functions and practices. Because of these, managers fail to respond when businesses require urgent intervention. The delay and ignorance makes them fail. Most management problems manifest themselves in control of time, setting of goals, measuring performance, finding qualified employees and failing to get valid business information (Fishman 78).
Marketing has also proved problematic for many businesses. Businesses fail to come up with proper marketing strategies that could help them sale their products. Problems come in, because of the failure of identifying the appropriate setting for the business enterprise. Because of this, business engage their marketing processes, to the wrong audience and setting, which cost businesses lots of funds that cannot come back as profits.
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Other business entities fail to use technological advancements to their advantage. They do not apply effective business skills, in the internet. Technological advancements should help businesses grow. However, businesses should use them effectively, in their work. The lack of proper use of technology leads to minimal performance. The business enterprise requires proper planning and thought. People should clearly think of the business opportunities they want to venture. This helps them to set up strategies that would lead to the success of that business. People should do enough research before choosing to start any business. Research helps them, to gather enough information that will help them know the amount of money they need for capital and the potential profit they may get.
The sector and the country or the environment, where the business has established decides the organization that the business follows. Certain countries require that business entities organize themselves in certain ways. For instance, a business may need to enter certain affiliations that attach to the respective sector. This will determine the kind of organization that the business will take.
To add on to that, certain countries require that businesses register its employees under trade or labor unions. Therefore, for the business to operate it has to ensure that it has met that requirement. This will automatically determine the organization that the business will take.
Other factors that could influence the organization of businesses involve limited liabilities, tax advantages and disclosure and compliance requirements among other issues.
Businesses also operate under certain guidelines that they have to consider. Some of the general factors that businesses have to consider involve general partners in the business. This applies when the business entity has a different ownership style other than sole proprietorship. Any person who owns a business and does so without creating a separate legal entity has a personal liability for debts and obligations of the business. Secondly, business corporations should pay tax the same way people pay taxes. In certain tax systems, this results to double taxation. This happens because the corporation pays taxes from the profits made, and distributes the profit, amongst its owners. These owners will have to pay tax again when they include dividends to their incomes.
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In certain countries, the laws treat small business entities, in a different way compared to how it treats large business entities. Small business entities may exempt from certain legal underpinnings or labor requirements. They may have simplified procedures in certain specialization fields and a slightly differentiated tax system.
In case, businesses decide to raise money, for instance, in the stock markets, several factors come, in to play. For example in most western countries, complex regulations and laws that offer governance, to the offer and sale of securities exist. They may need disclosure of certain financial information and other business internal information, which may give buyers certain remedies. Most investment transactions subject to those laws exempt through a special exemption. Businesses that establish publicly must adhere to the detailed and complicated regulations of internal governance.
Most businesses have significant intellectual property that requires protection from competitors. This happens because the company requires this property for its profits. The protection of intellectual property may require copyrights or the preservation of the trade secrets of the company. In western countries, like the United States of America, the federal laws protect copyrights, which preserve intellectual property. Trade secrets and trademarks acquire protection from state law. A business requires protection from every jurisdiction that may contain competitors. As such, many countries have signed international business treaties, to help protect business intellectual property (Caputo 234).
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The term business refers to a wide variety of concepts. However, the most use definition entails engaging in moneymaking organizations. For any business to succeed people should practice high-quality management techniques. These help to alleviate problems that arise from negligence and improper management skills. Businesses should observe all regulations that they should observe. Following the right procedure should guide any business process. However, business must undergo problems. Sometimes these problems occur without prior expectation, for instance, natural calamities. These present a challenge because they prove inevitable.