BUSINESS
BUSINESS
What is Business
A business is defined as an organization or enterprising entity engaged in commercial, industrial, or professional activities. Businesses can be for-profit entities or they can be non-profit organizations that operate to fulfill a charitable mission or further a social cause.
Business is the activity of making one's living or making money by producing or buying and selling products (such as goods and services).[1][2][need quotation to verify][3][4] Simply put, it is "any activity or enterprise entered into for profit.
Business is either your occupation, profession, or trade, or is a commercial activity which involves providing goods or services in exchange for profits.
Profits in business are not necessarily money. It can be a benefit in any form which is acknowledged by the business entity involved in the business activity.
The term "business" also refers to the organized efforts and activities of individuals to produce and sell goods and services for profit. Businesses range in scale from a sole proprietorship to an international corporation. Several lines of theory are engaged with understanding business administration including organizational behavior, organization theory, and strategic management.
#Concept Of Business
The business concept is the fundamental idea behind the business. The business model, plan, vision, and mission are developed based on this concept. Uber, for example, was started on the concept of aggregating taxi drivers and providing their services on demand under one brand. Every other business strategy was developed based on this confict.
Businesses can range from small operations operating in one industry to large operations operating in many industries around the world.
Understanding a Business
Generally, a business begins with a business concept (the idea) and a name. Depending on the nature of the business, extensive market research may be necessary to determine whether turning the idea into a business is feasible and if the business can deliver value to consumers. The business name can be one of the most valuable assets of a firm; careful consideration should thus be given when choosing it. Businesses operating under fictitious names must be registered with the state.
Businesses most often form after the development of a business plan, which is a formal document detailing a business's goals and objectives, and its strategies of how it will achieve the goals and objectives. Business plans are almost essential when borrowing capital to begin operations.
It is also important to determine the legal structure of the business. Depending on the type of business, it may need to secure permits, adhere to registration requirements, and obtain licenses to legally operate. In many countries, corporations are considered to be juridical persons, meaning that the business can own property, take on debt, and be sued in court.
#Business Structures /Forms of business
Many businesses organize themselves around some sort of hierarchy or bureaucracy, where positions in a company have established roles and responsibilities. The most common structures include sole proprietorships, partnerships, corporations, and limited liability companies (LLC), with sole proprietorships being the most prevalent.
Business Sizes
Business sizes range from small owner-operated companies, such as family restaurants, to multinational conglomerates such as General Electric. Larger businesses may issue corporate stock to finance operations. In this case, the company is publicly traded and has reporting and operating restrictions. Alternatively, smaller businesses may operate more independently of regulators.
Business Industries
A company may describe its business by communicating the industry in which it operates. For example, the real estate business, advertising business, or mattress production business are industries in which a business can exist. Because the term “business” can be interchanged with day-to-day operations as well as the overall formation of a company, the term is often used to indicate transactions regarding an underlying product or service. For example, ExxonMobil transacts business by providing oil.
Business Firm
A firm is a business organization—such as a corporation, limited liability company, or partnership—that sells goods or services to make a profit. more
Sole Proprietorship: What You Should Know
A sole proprietorship, also known as a sole trader or a proprietorship, is an unincorporated business with a single owner who pays personal income tax on profits earned from the business. moreUnderstanding Companies
Business company
A company is an organization and legal entity set up by a group of people for the purpose of operating either a commercial or industrial business enterprise. more
Limited Liability: What You Need to Know
Limited liability is a type of liability that does not exceed the amount invested in a partnership or limited liability company. more
TYPE OF BUSINESS
There are different kinds of business which are :
#A sole proprietorship,
As its name suggests, is a business owned and operated by a single natural person. There is no legal separation between the business and the owner; the tax and legal liabilities of the business are thus that of the owner.
Sole proprietorship is a business owned and operated by a single individual. It is easy to set-up, operate, and register. All the profits of the business belong to the owner and he’s also liable for all the liabilities incurred.
The biggest drawback of this business that the owner faces unlimited liability. This means that the creditors of the business can go after the personal assets of the owner if the business is unable to pay them.
A partnership is a business relationship between two or more people who join to conduct business. Each partner contributes resources and money to the business and shares in the profits and losses of the business. The shared profits and losses are recorded on each partner's tax return.
Partnerships come in two forms – general and limited. A general partnership is like sole proprietorship but with more than one owner where all the owners face unlimited liability. In limited partnerships, some or all of the partners have limited liability.
A corporation is a business in which a group of people acts together as a single entity; most commonly, owners of a corporation are shareholders who exchange consideration for the corporation's common stock. Incorporating a business releases owners of the financial liability of business obligations; however, a corporation has unfavorable taxation rules for the owners of the business.
A corporation is a business which has a separate legal identity from the people who own or run it. Ownership is usually represented in the form of shares of the stock.
Owners enjoy limited liability but are not necessarily involved in running the business. The business is operated by a group (board of directors) elected by the shareholders.
Cooperative is a private business organisation owned and controlled by people for their mutual benefits. These people are called members and are benefitted by the goods and services offered by the cooperative. All members are expected to help run the business as the main motive of the cooperative is to provide service to all the members rather than a return on investment.
#Limited Liability Company
A limited liability company is a hybrid form of business which has characteristics of both a corporation and a partnership. A partnership because it is not incorporated and a corporation because all of the partners/owners enjoy limited liability.
#HOW TO START A BUSINESS
Starting a business involves some steps such as planning, making key financial decisions, and completing a series of legal activities. Scroll down to learn about each step.
#Conduct market research
Market research will tell you if there’s an opportunity to turn your idea into a successful business. It’s a way to gather information about potential customers and businesses already operating in your area. Use that information to find a competitive advantage for your business.
#Write your business plan
Your business plan is the foundation of your business. It’s a roadmap for how to structure, run, and grow your new business. You’ll use it to convince people that working with you — or investing in your company — is a smart choice.
#Fund your business
Your business plan will help you figure out how much money you’ll need to start your business. If you don’t have that amount on hand, you’ll need to either raise or borrow the capital. Fortunately, there are more ways than ever to find the capital you need.
#Pick your business location
Your business location is one of the most important decisions you’ll make. Whether you’re setting up a brick-and-mortar business or launching an online store, the choices you make could affect your taxes, legal requirements, and revenue.
#Choose a business structure
The legal structure you choose for your business will impact your business registration requirements, how much you pay in taxes, and your personal liability.
#Choose your business name
It’s not easy to pick the perfect name. You’ll want one that reflects your brand and captures your spirit. You’ll also want to make sure your business name isn’t already being used by someone else.
#Register your business
Once you’ve picked the perfect business name, it’s time to make it legal and protect your brand. If you’re doing business under a name different than your own, you’ll need to register with the federal government, and maybe your state government, too.
#Get federal and state tax IDs
You’ll use your employer identification number (EIN) for important steps to start and grow your business, like opening a bank account and paying taxes. It’s like a social security number for your business. Some — but not all — states require you to get a tax ID as well.
#Apply for licenses and permits
Keep your business running smoothly by staying legally compliant. The licenses and permits you need for your business will vary by industry, state, location, and other factors.
#Open a business bank account
A small business checking account can help you handle legal, tax, and day-to-day issues. The good news is it’s easy to set one up if you have the right registrations and paperwork ready.
A Business Plan
Business plans are just like a road maps; it’s possible to travel without one, but it will only increase the likelihood of getting lost along the way.
Rather than putting yourself in a position where you may have to stop and ask for directions or even circle back and start over, entrepreneurs often use business plans to help guide them. That’s because they help business owners see the bigger picture, plan ahead, make important decisions, and improve the overall likelihood of success.
Why is business plan important?
A well-written business plan is an important tool because it gives entrepreneurs the ability to lay out their goals and track their progress as their business begins to grow. Formulating a business plan should be the first thing done when starting a new business. Business plans are also important for attracting investors so they can determine if your business in on the right path and worth putting money into
Business plans typically include detailed information that can help improve the business’s chances of success, like a market analysis, competitive analysis, customer segmentation, marketing, logistics and operations plans, cash flow projection and an overall path to long-term growth.
Though it may sound tedious and time-consuming, business plans are critical to success. To outline the importance of business plans, here are 10-reasons why you need one for your small business.
- To help you with critical decisions
While business plans have many purposes, the primary importance of a business plan is that they help business owners make better decisions.
Entrepreneurship is often an endless exercise in decision making and crisis management. Sitting down and considering all the ramifications of any given decision is a luxury that entrepreneurs can’t always afford. That’s where a business plan comes in.
Building a business plan allows you to determine the answer to some of the most critical business decisions ahead of time. Creating a robust business plan is a forcing function—you have to sit down and think about major components of your business before you get started, like your marketing strategy and what products you’ll sell. You answer many tough questions before they arise. And thinking deeply about your core strategies can also help you understand how those decisions will impact your broader strategy.
To iron out the kinks
Putting together a business plan requires entrepreneurs to ask themselves a lot of hard questions and take the time to come up with well-researched and insightful answers. Even if the document itself were to disappear as soon as it’s completed, the practice of writing it helps to articulate your vision in realistic terms and better determine if there are any gaps in your strategy.To avoid the big mistakes
According to the Small Business Administration, only about half of small businesses are still around to celebrate their fifth birthday. While there are many reasons why small businesses fail, many of the most common are purposefully addressed in business plans.
According to data from CB Insights, some of the most common reasons businesses fail include:
No market need: No one wants what you’re selling.
Lack of capital: Cash flow issues or businesses simply run out of money.
Inadequate team: This underscores the importance of hiring the right people to help you run your business.
Stiff competition: It’s tough to generate a steady profit when you have a lot of competitors in your space.
Pricing: Some entrepreneurs price their products or services too high or too low—both scenarios can be a recipe for disaster.
However, the exercise of creating a business plan can help you avoid these major mistakes. Whether it’s cash flow forecasts or a product-market fit analysis, every piece of a business plan can help spot some of those potentially critical mistakes before they arise.
Get a jumpstart on your business plan by creating your own cash flow projection >
- To prove the viability of the business
Many businesses are created out of passion, and while passion can be a great motivator, it’s not a great proof point. Planning out exactly how you’re going to turn that vision into a successful business is perhaps the most important step between concept and reality. Business plans can help you confirm that your grand idea makes sound business sense.
A critical component of your business plan is the market research section. Market research can offer deep insight into your customers, your competitors, and your chosen industry. Not only can it enlighten entrepreneurs who are starting up a new business, but it can also better inform existing businesses on activities like marketing, advertising, and releasing new products or services.
Want to prove there’s a market gap? Here’s how you can get started with market research >
To set better objectives and benchmarks
Without a business plan, objectives often become arbitrary, without much rhyme or reason behind them. Having a business plan can help make those benchmarks more intentional and consequential. They can also help keep you accountable to your long-term vision and strategy, and gain insights into how your strategy is (or isn’t) coming together over time.To communicate objectives and benchmarks
Whether you’re managing a team of 100 or a team of two, you can’t always be there to make every decision yourself. Think of the business plan like a substitute teacher, ready to answer questions anytime there’s an absence.
Let your staff know that when in doubt, they can always consult the business plan to understand the next steps in the event that they can’t get an answer from you directly. Sharing your business plan with team members also helps ensure that all member are aligned with what you’re doing, why, and share the same understanding of long-term objectives.
- To provide a guide for service providers
Small businesses typically employ contractors, freelancers, and other professionals to help them with individual tasks like accounting, marketing, legal assistance, and as consultants. Having a business plan in place allows you to easily share relevant sections with those you rely on to support the organization, while ensuring everyone is on the same page.
Ready to grow your team? Learn when (and how) to hire a contractor for your business >
- To secure financing
If you’re planning on pitching to venture capitalists, borrowing from a bank, or are considering selling your company in the future, you’re likely going to need a business plan. After all, anyone that’s interested in putting money into your company is going to want to know it’s in good hands and that it’s viable in the long run.
Business plans are the most effective ways of proving that and are typically a requirement for anyone seeking outside financing.
Learn what you need to get a small business loan >
- To better understand the broader landscape
No business is an island, and while you might have a strong handle on everything happening under your own roof, it’s equally important to understand the market terrain as well.
Writing a business plan can go a long way in helping you better understand your competition and the market you’re operating in more broadly, illuminate consumer trends and preferences, potential disruptions and other insights that aren’t always plainly visible.
- To reduce risk
Entrepreneurship is a risky business, but that risk becomes significantly more manageable once tested against a well-crafted business plan. Drawing up revenue and expense projections, devising logistics and operational plans, and understanding the market and competitive landscape can all help reduce the risk factor from an inherently precarious way to make a living.
Having a business plan allows you to leave less up to chance, make better decisions, and enjoy the clearest possible view of the future of your company.
With this Understanding of the importance of a business plan give you a solid grasp on the “why” behind business plans, you can confidently move forward with creating your own and to check out for those guide to help you get started.