A business is defined by the US Department of the Treasury as an unincorporated organization or business, any one of whose specific purposes is to engage in commercial, industrial or service activities for the benefit of other people or the public. Business enterprises can either be sole proprietorships or partnerships which share equal shares or liability. Companies can also be corporations or associations which carry on specific businesses, activities, or operations for the benefit of other people, institutions, or communities. The term “enterprise” is derived from “enter” and “to establish.” The first part, “establishing,” pertains to the legal process of incorporating a business.
There are two general types of business: sole proprietorship and corporation. A sole proprietorship is a relationship between a person or persons and the government in which the person or persons to act as representatives or managers of the business. Examples include partnerships between a sole proprietor and another individual who carry out the duties or works under the guidance of the sole proprietor. The government appoints the partners for the benefit of the public. Examples of sole proprietor businesses include shops, sole proprietorships, franchises, and various types of shops which sell primarily for profit.
Corporations, meanwhile, are organizations that have more than one share or owner. The officers or managers of a corporation are also the managers of the shareholders. Unlike sole proprietor businesses, corporations do not manage their own resources or work for themselves. Rather, corporations use their resources or profits to create social need or enhance the public welfare. For example, to contribute to the funding of roads, a corporation must invest in assets such as land, property, and assets which generate income and profits.
Profit is the difference between the total cost of an activity and the revenue received. Profits are the product of economic objectives. A business organization may receive revenues from various sources, such as sales of its products, services, and other goods and services offered. In addition, it can also receive revenues from the indirect results of its business activities, such as the results obtained from the sale of its goods and services and the improvement of its buildings and infrastructure. Whatever profits business organization obtains can be classified into three basic categories: income, assets, and assets due to ownership.
A business organization may also obtain certain revenues by engaging in joint ventures or through licenses, fees, and tariffs. Profits from joint ventures are shared between the owners or partners of the partnership. Examples of these revenues include the profits obtained through a partnership agreement between two companies. In a case of a sole proprietorship, the profits come only from the direct or indirect results of the business activity.
The term “profit” is normally understood to mean monetary gains or revenue. However, businesses should be viewed on a broader scale, including both monetary and non-monetary gains derived from doing business. A business may have a large number of customers who purchase its goods and services, while at the same time providing low prices to those who purchase its products. On the other hand, a sole proprietor has limited purchases and sales. Therefore, the prices of its goods and services are usually higher than those of its competitors.