Business is an organized system by which individuals interact with each other. In a business, individuals work with others to create and sale goods or services. Others also purchase the goods and services sold by the firm. The firm itself then makes a profit from the transactions made through the sales system.
A business operates in a closed system. There are usually no friends, relatives or competitors among the firm. The business owner hires workers to do various tasks for him. The workers perform these tasks to produce goods and services that will be bought by customers. Businesses also generate profits from selling the goods and services they have produced.
There are many types of businesses that generate profits. The most common ones are sole proprietorship, partnership, limited liability company and corporation. Partnerships are different from sole proprietor businesses because they are established on behalf of the partners themselves. Examples of these businesses are limited liability partnerships, partnership partnerships and corporation.
sole proprietorship is a form of business where one person owns the business. Every business has its own advantages and disadvantages. One advantage of a sole proprietorship is that profits can be maximized with minimum input from workers. It also allows owners to have control over the way their company operates. On the other hand, in this type of business the profits are not evenly shared among the owners. Owners have the most control over how their business operates.
A partnership is a formalized relationship between two or more people. Partners participate in the business activities for mutual benefit. A business organization consists of different people working together to achieve an economic objectives. Some examples of these objectives are making profit, building reputation and enhancing market share.
Limited liability company is another business activity. This is a legal set-up where one person controls the assets of another person. In this business model, there is no board of directors to regularly make decisions. All business activities, decisions related to staffs, investment and purchase of goods and materials are made by the officers of the LLC. All profits, losses and dividends are divided between the LLC and the persons who are interested in the business.
Nowadays sole proprietorship and partnership have become obsolete because they are difficult to run and manage. The new business organisation models offer several advantages. For one, there is no need to hire management or officers, the owner controls all business activities. Also, the profits and losses are shared between partners, so the business gets to distribute the profits according to the investment made by partners. Also the limited liability feature of these organisations allows small businesses to expand without any difficulty.
One of the biggest disadvantages of sole proprietorship and partnership is that the business owner and the partners cannot agree on the objectives of the business. This means that the business will not be able to generate profits or expand. In case of a partnership, however, both partners can agree on the same objectives and run the business successfully. The only disadvantage of a joint venture is that if the partners do not generate profits and lose the business, then both the partners will be responsible for the loss. A sole proprietorship will allow the business owner to run the business uninterrupted by any other third party. However, in order to generate profits the sole proprietor must engage in marketing.