Types of Corporations and Business Ventures | ENTRE Institute Reviews

 

Business: Business is a broad term that signifies the activity of making a profit and making business or profit. It is an important role of government to help business grow. It includes activities like production, distribution, consumption and financial support. Basically it encompasses all financial activities of any kind.

Profits: Profits are the incomes accruing from the sale of a particular asset or earning of a certain amount of money. The profit made by the entrepreneur is termed as the profit. It varies from one business venture to another. There are two types of profit, the primary profit and secondary profit. The primary profit refers to the revenue that arises from the sale of only the physical assets of the business and the profits made through production. In case of businesses where the production does not include the sale of products there is no need to specify the profit.

Business Strategy: The business strategy is a way of understanding which part of your business can be conducted on your own and which has to be conducted along with the help of external resources. A business strategy should be a written document that lists out the scope of activities of the enterprise. It should lay down the purpose of the enterprise and the line of action to reach it. It should also provide an overview of the competition and list down the steps that will have to be taken to remain ahead of the game.

Economic structure: The structure of any business firm is mainly based on the profit that it makes. This profit is determined by the overall performance of the firm. Every business needs a steady flow of cash in order to carry on with its activities. Today's economic scenario has forced the business firms to seek aid from several finance resources.

Profit sharing: All the profits that are made by a business firm are divided among the shareholders. This is a very old method that was first introduced in capitalism. This is one of the best methods of ensuring that only the top investors get a share of the profits. The capitalist system ensures that the interests of all the stakeholders are considered and hence there is less scope for partiality.

Formation of a partnership: All the corporations have the option of formation of a partnership or a limited liability partnership (LLP). In a partnership, half of the share capital is kept by the partners and the other half by the shareholders. In case of an LLP, the ownership is distributed between the partners and the general public. Many corporate bodies have started operating on a for-profit basis. This has made the formation of a business association even more attractive.

Sole proprietorship: A sole proprietorship is a form of business structure where the owner exercises complete control over the business. This type of structure ensures that the owners make high profits but do not have any personal assets. The sole proprietor can be assisted by a board of directors with limited accountability. The profits and losses that are incurred in the business are managed by the board of directors.

All the above mentioned types of business structures to ensure that the individual who owns the business has complete control over it. However, there is a drawback with these types of business structures. The profit that is made from the business is exempt from the income tax. There are special rules applicable to sole proprietorship and partnerships.

A sole proprietorship is different from a partnership because there is no partnership with others. The sole proprietorship is actually formed alone and holds all the power and ownership within itself. A sole proprietorship can only have limited liability. No shareholder benefits from the business owned in this manner.

Many corporate bodies have now started recognizing the potential benefits of sole proprietorship and partnerships. Most of the countries have removed the anonymity associated with corporations. Proving ownership of the business helps prove that the business exists and is run legally. Furthermore, proving that the company is run legally provides evidence that the businesses are prospering.

On the other hand, many countries have incorporated partnership as a means to create economic activity and a limited liability company. Unlike a sole proprietorship, a partnership allows its owner to form a partnership with others. The benefit of a partnership is that there is limited liability. Another advantage of partnerships is that it does not allow the partners to have exclusive rights to the assets of the business. Many partnerships share the assets and income produced by the business and still enjoy some limited liability.