What is business?

Business is a word that is commonly used in many different languages. But exactly what does it mean? Traditionally business simply meant exchange or trade for things people wanted or needed. Today this broad term can be applied to different kinds of human activity and many kinds of enterprise.

All activities traditionally related to business can be grouped under three headings: production, distribution and sales. The first group of activities, production, concerns the changing of materials into products or the creation of services. Some businesses produce what is called tangible goods, such as cars, clothes, foodstuffs. Others produce intangible goods or services, which are activities that people perform for other people. Such activities as insurance, banking operations or health protection are referred to as services.

The second group of activities is known as distribution. Distribution is the process of getting goods from the producer to the consumer in the quickest and most efficient way. Distribution is performed through distribution channels that link the producer and the consumer directly or indirectly with the aid of intermediaries.

Third is the sale of goods and services. Sale is the exchange of a good or service for money. Money that a company receives from the sale of its products is called revenues. If the company is a success its revenues not only cover its expenses, that are the money spent on the production of the output, but also contain some surplus. This surplus is commonly defined as profit or the difference between the company’s revenues and expenses. Thus, creating an economic surplus or profit is the primary goal of any business activity.

Just as important as profits are social and ethical responsibilities that companies bear in their dealing with employees, consumers, suppliers, competitors, government and the society. Business, then, can be broadly defined as all profit-seeking activities and enterprises that provide the means through which the society’s standard of living improves.

Forms of Business Organization

A business may be privately owned in three different forms. These forms are: the sole proprietorship, the partnership and the corporation.

The sole proprietorship is the simplest organizational form. There is one owner who makes decisions without consulting anyone. Most private businesses are sole proprietorships. First of all, they are service industries, such as beauty shops, different repair shops, restaurants. But they account for only small part of all business receipts.

A partnership is an association of two or more partners to carry on business for profit. When the owners of the partnership have unlimited liability they are called general partners. If partners have limited liability they are limited partners. There may be a silent partner – a person who is known to the public as a member of the firm but without authority in the management, and a secret partner – a person who takes part in management but who is not known to the public. The advantages of this form are obvious: it can provide a big capital, diversified management, tax benefits from the government. nonprofit.