Introduction to Business/Overview
When we look around us, we observed that most of the people are engaged in one activity or the other. Teacher teach in the school, farmers work in the fields, workers work in the factories, drivers drive vehicles, shopkeepers sells goods, doctors attend to patients and so on. In this way,people are busy during the day and sometimes during the night throughout the year. Now the question WHY we all keep ourselves busy. The answer is to satisfy our wants. By doing so, we either fulfill various obligations or earn money through which we can buy goods and commodities.
Business is a human activity in order to satisfy our wants.
Activities which human being undertake are known as human activities. These may be cultivating land, growing plants, rearing animals, teaching in school or college, working in a factory or office, watching television, listening radio, reading newspaper, worshiping in a temple, playing football, etc. We can divide this activities into two broad categories as (i) economic activities (ii) non-economic activities
(i) Economic activities
Activities, which are performed with an objective to earn money, are known as economic activities. For example, a farmer grow crops to sell them, a factory or office employee works and gets wage or salary, a businessman earns profit through buying and selling of goods.
(ii) Non-economic activities
Activities which are not performed to earn money but to get some satisfaction
Types of Businesses
A sole proprietorship is a business run by one person. This one person, known as a proprietor, has the advantage of being in control of the entire business, and having all the income of the business going directly to him or her. The downside of this is that a Sole Proprietorship is not taxed as a business entity, so all income of the business is taxed as personal income tax. Additionally, the proprietor has Unlimited Liability meaning that if the business goes under, and the assets of the business are insufficient to satisfy the debts of the business, the creditors can seize the personal assets of the proprietor.
A partnership is a firm run by more than one person. These people are all known as partners of the company, and they have the advantage of sharing the losses, but have to share the profits too. The percentage of sharing loses and profits could be determined according to the partnership agreement drawn between the partners, they vary from country to country. The partners make all decisions collectively, and each partner is responsible to the others for any decision he makes with relation to the business. Each partner, by the virtue of being a partner, represents the business and is expected to act in ways that won't be detrimental to the business. New Partners are added for their expertise. Partnerships are easy to form usually professionals lawyers, doctors and consultants form partnership to benefit from the expertise of each other.
Private Limited Companies
A private limited company too can have just two shareholders. However the shareholders of a private limited company could be limited to family members or friends. A private limited company is formed by registering the memorandum and articles of association with the local registrar of companies. The shareholder liability is limited to the authorized share capital. It is less complex to form unlike a public limited company. The rules and regulations on the formation of a private limited company have to be checked out with your local chamber of commerce or registrar of companies. The accounts of a private limited company have to be audited by independent auditors and board of director; they meet regularly to make decisions and they have an annual general meeting when all shareholders meet to discuss the wider management issues of the company.
A corporation is created as a separate legal entity that has privileges and liabilities that are distinct from those of its owners. Despite not being a natural person, corporations are recognized by the law, in some countries and the USA in particular, as having the same legal rights and responsibilities as natural persons ("people"). The formation of a corporation protects the owners against unlimited liability. As long as the business operates legally it is liable to it's creditors only the value of the assets of the business. If the corporation fails the investors are liable only for the assets of the business.