What is the definition of a business? A business is so defined by the US congress that it includes any trade entered into by individuals for profit or reward. The word “commerce” is also used to define business. Essentially, a business is defined as any commercial activity or organization conducted for the profit or reward of people. A businessperson can be any person having the power to control the use of his resources to conduct commercial activities.
A business organization is formed for the purpose of profit or gain. A firm may be established to conduct trade, manipulate resources or for other business activities leading to economic objectives. A firm is established to carry on business affairs for the benefit of its members. In order to attain the objective, the company must be organized economically and operate harmoniously. The company’s products or services must be procured at the right price for the greatest possible volume.
Economic objectives refer to the ends reached by the organization in the course of its operations for the purpose of increasing its profits. A company’s activities may be aimed at achieving competitive advantage, realizing profits, reducing cost and improving productivity, or building market share. There are many economic objectives. The aim of the economic activity of a company can be known as the motive of the enterprise. For instance, a business may be formed for the purpose of establishing a manufacturing base, increasing the output of existing products, minimizing the cost of production, promoting better sales, expanding market share, laying the foundation for a diversified economy, etc.
The corporate form of business consists of several types of corporations. These include a partnership, a corporation, a partnership plus a partnership, a general partnership, a non-creating trust, a limited liability company, a partnership in operation over the years, a real estate holding corporation, a cooperative corporation, a proprietary institution, stock ownership, partnership with others, etc. A corporation may be formed without being formed as a sole proprietorship, although it would be difficult to alter the ownership structure of a corporation without an act of a court. A sole proprietor has complete control over his personal assets but cannot control the use of those assets for the benefit of the corporation. Neither can he appoint others to serve as directors of the corporation.
The various types of corporations are described in the following tables. The abbreviations shown are the dollar amount in millions. E is the equity of the corporation. C is the capital stock of the corporation. P and S are the shareholders of the corporation and S is the surplus profit of the corporation.
The profits of the corporations are taxed according to the personal income tax system of the United States. A U.S citizen is allowed to claim dividends on behalf of the corporation, which are taxable. In case of corporations that have no shareholders, but only capital stock, the dividends are taxable only to the owners and are not taxable to the corporations as a whole.