A business is an institution in which people engage in business activities. In a typical business, people engage in different activities to create and sale goods or services to consumers. Others sell the goods and services to other entities. Therefore, a business may earn a profit from the selling of the goods and services it provides.
The term “business” is also used as “enterprise”, “commerce”, “franchise” and “asset”. It is therefore a very general term that may be applied to any and every kind of undertaking in the social sciences. However, the meaning of “business” has certain restrictions. It generally indicates activities related to production, exchange and communication of information, ideas and goods. A business enterprise may be a partnership, a simple partnership or may be organized as a corporation, partnership, company, trust or company in publication.
There are three general kinds of business: personal enterprise, partnership, and corporations. A personal or private firm is a separate entity from which the partners in a firm share profits and losses. There is no transfer or succession of responsibilities in case of a private firm. A partnership is a form of corporation in which there is a partnership or group of partners exercising joint-vestigations, voting and holding the shares or by dividends, interests and property.
A corporation is formed for the purpose of sharing the risk of assets and profits. It is managed by a Board of Directors elected by the shareholders. A limited company is formed for the purpose of conducting business affairs as a distinct entity from the shareholders and officers of the corporation. In addition, a limited company may use the assets, accounts, liabilities and capital to meet its obligations, but does not have share capital. The term ‘limited liability company’ refers to a corporation that has limited liability.
Small businesses comprise the majority of businesses. The vast majority of small businesses are owned and operated by individuals or families. As their name implies, these businesses have limited liability; therefore, they can only carry on business as members of an entity. A company limited by equity will not have share capital, but will be able to issue debentures or common stock to its members and use them to finance the business.
A corporation and limited liability company are very similar, despite being different in some aspects such as their legal status. Both corporations and LLCs have the same standing as legal corporations recognized under federal law. Similarly, both types of business are subject to federal and state taxation. However, the main difference between a corporation and an LLC is that an LLC is not legally considered a real estate investment trust and as such is not required to file reports with the state.