Business Categories

Business is the relationship between market participants about their joint activities aimed at generating profit (or other forms of income) from the use of capital.

Business is a proactive economic activity carried out at the expense of your own or borrowed funds at your own risk and under your responsibility, setting the main goals of earning income and developing your own business.

Business as a capitalist relationship is characterized by:

  • The presence of initial capital invested in a particular business;
    the purposeful nature of the investment of the original capital – to make a profit (income) on invested capital;
  • the establishment of certain relationships with other market participants on the use of capital (both initial and subsequent).

The economic relations that individuals enter into when engaging in business are so complex and multifaceted that they do not allow for a clear definition of the boundaries of this activity. Therefore, entrepreneurial activity is defined as a legal concept.

Business – is always a legally formalized type of human activity, which can be carried out only within one of the legally established forms of economic activity.

Entities

The subjects of business (businessmen) –┬ácan be free in their actions in the market by individual owners of capital – individuals, as well as owners and owners of enterprises, acting as legal entities.

In countries with market economies hundreds of thousands of people, alone or in groups, risking their capital, open new businesses every year.

The concept of “business” is often wrongly confused with the concepts of “entrepreneurship” and “commerce.

Business – is any kind of activity in the sphere of social production, which brings income or other personal benefits. But economic activity can be carried out in the sphere of material and non-material production. Therefore, it is more correct to subdivide business into entrepreneurship (economic activity in the sphere of material production) and commerce (economic activity in the intangible sphere). Entrepreneurial activity results from intangible goods (goods), and commercial activity results in intangible goods (services).

Forms

Business can be conducted in three basic forms:

  • Individual or private enterprise;
  • partnerships;
  • Corporation (joint-stock company).

A individual is a business owned by one person. The owner of a sole proprietorship also acts as a manager. This is the most common form of business, characteristic of small stores, service businesses, farms, the professional activities of lawyers, doctors, etc.

A partnership is a business owned by two or more people. The advantages of partnerships are that they are easy to organize, bringing partners together allows them to attract additional funds and new ideas. The disadvantages include:

Limited financial resources;

  • ambiguous understanding of the aims of partnership by its participants;
  • difficulties in determining the share of each participant in the income and losses of the partnership, in the division of the property, acquired together.

A corporation is a set of persons united for joint business activities as a single legal entity. The title to the property of a corporation is divided into portions by shares. Therefore, owners of corporations are called stockholders and the corporation itself is called a stock corporation. Holders of corporations have limited liability for the debts of the corporation as determined by their contributions to the stock.

The advantages of corporations include:

  • Unlimited opportunities to raise cash capital through the sale of stock and bonds;
  • separation of shareholder rights into a property and personal rights.

Disadvantages of the corporate form of business organization include:

  • double taxation of that part of the corporation’s income which is paid as dividends to stockholders: the first time as part of the corporation’s profits, and the second time as part of the stockholder’s income;
  • favorable opportunities for economic crime. It is possible to issue and sell the stock with no real value;
  • Separation of ownership and control functions. Incorporations whose stock is dispersed among numerous owners, the function of control is severed from the function of ownership. The owners of the stock are interested in maximum dividends, while the managers try to reduce them to let the money circulate.
  • There are other disadvantages of corporations, but their advantages prevail over the disadvantages.