A business is broadly defined as a commercial entity or organization that engages in business activities of any kind. Most businesses are either for-profit or non-profit entities that conduct business in order to meet a social objective or further a specific social cause. There are different types of business activities that may be conducted and each has its own distinct characteristics. There are various factors such as location, line of business, technology and competition which determine the nature of a business and its scope.
For instance, a sole proprietorship is generally seen as the most basic form of a business. It is where one person owns all the assets of the business while another is the main owner and acts as the representative and manager of the business. This form of business is also commonly referred to as a corporation. LLC or Limited Liability Company is a form of sole proprietorship where the main owner or the LLC is legally separated from the other party. In this type of business an individual can still continue to act as the main owner of the business. On the other hand, in a corporation all share holders are legally separated, and there is only one director as the main shareholder with all the other share holders as partners.
A partnership is where two or more people are related by blood, marriage or similar bond. A general partnership is one in which both partners have shares in the same asset. Partnerships may still be limited liability partnerships (LLCs) where there is only one partner. Some partnerships are considered to be mere forms of corporations. A business owned by the LLC is treated just like a private company in the eyes of the IRS.
A corporation is created by the articles of incorporation, which includes incorporating the business as a separate entity from the shareholders. All shareholders are treated as partners and not as owners. The company becomes a separate legal entity from its owners, meaning that all debts of the business are solely the responsibility of the corporation and therefore do not need to be paid off individually by the owners. A corporation may be run by a single shareholder or by a board of directors, depending on the set up of the company.
For-profit businesses are the most common form of business in the United States. Most business owners are sole proprietors and operate their businesses as for profit. Many for-profit businesses exist, like restaurants, personal medical care services, private schools, and private contractors. Many times these types of businesses are not subjected to corporate taxation because they are conducted on a for-profit basis, but are instead taxed on the net income created by the business.
There are many countries around the world that have different business types, and it depends on the laws of each country as to what business types a business may operate in. Each type of corporation has different requirements, such as reporting to governments and paying taxes. Corporations can also incorporate in many countries, but a corporation is considered a separate legal entity in most countries outside the United States, which requires special legal rights for foreigners investing and forming corporations.