What is business?
Business is any activity that is performed for the purpose of generating a profit on a repeated basis. Business encompasses commercial, industrial, charitable, and professional activities that involve selling goods or offering services. A business is an entity that operates for the purpose of producing an economic benefit.
Business as a noun: A local lead generation business is one of the most profitable opportunities.
Business as an adjective: It’s a good idea to have a business plan before starting any new venture such, as Shopify dropshipping.
Other common names for business are company, organization, and enterprise.
A simple definition of business is exchanging value for money.
What are the 10 characteristics of business?
- 1Economic activity - Business involves using inputs like capital, raw materials, skills, and labor to offer goods and services in the economy. It’s an economic activity that brings about opportunities for employment and overall financial gain for society.
- 2Profit motive - Although many businesses operate with upstanding motives like charity or environmental sustainability, profit is the primary goal. Profitability indicates that a business is making efficient use of its resources to provide valuable to the economy. If a business is not profitable, it will eventually cease to exist.
- 3Buying and selling - At its core, business is about trading. A business buys resources like raw materials and employee labor time to transform them into a valuable offer, and then exchanges that offer for money.
- 4Risk and uncertainties - Every business is subject to risks and unpredictable factors like changing raw material or labor costs, consumer trends, or economic conditions.
- 5Continuous process - Businesses make money by repeatedly offering goods or services to generate profit. A single transaction is not considered a business, it needs to be continuous.
- 6Customer satisfaction - A primary function of business is to attract and retain customers. Satisfied customers offer social proof that a business is providing value to society.
- 7Creative and dynamic - Modern businesses operate in a constantly changing environment driven by technology and innovation, and so must remain dynamic in order to stay competitive. Stagnant businesses don't last.
- 8Social activity - These days, businesses are heavily influenced by social responsibility. In fact, 70% of consumers believe it’s important for brands to publicly promote their stance on social and political issues. As such, modern business is very much a social activity as much as it is an economic one.
- 9Government control - All businesses must adhere to the laws and regulations of the location they operate in, such as tax obligations. Government control ensures businesses operate fairly and ethically.
- 10Efficient utilization of resources - Businesses are tasked with bringing together resources to produce something of greater value than the resources considered individually. Businesses must optimize the use of their resources in order to produce something of value in order for economic gain to occur.
Common business structures
The four main types of business are sole proprietorship, partnership, C corporation, and S corporation, according to the United States Internal Revenue Service (IRS).
- Sole Proprietorship - Also called a sole trader, this is an unincorporated business entity owned by a single person. A sole proprietorship is the most common type of business, with 73.1% of US businesses operating with the designation, according to Tax Foundation. Sole proprietors have unlimited liability for business debts because they do not create a separate legal entity for their business.
- Partnership - When two or more people do trade or business, a partnership is formed. Each partner can contribute either money, property, labor, or skills to the business and shares in the profit or losses the business generates.
- C Corporation - This is a standalone taxpaying entity that conducts business, realizes net profit or loss, pays taxes, and distributes any profits to shareholders. Shareholders exchange money and/or property to access a corporation's capital stock for the opportunity to partake in the economic gains (or loss) of this business. C corporations are subject to double taxation as owners pay corporate income tax as well as individual income tax on any capital gains or dividends.
- S Corporation - Like a C corporation, an S corporation is a standalone taxpaying entity that conducts business, realizes net profit or loss, pays taxes, and distributes any profits to shareholders. However, this type of entity passes corporate income, losses, deductions, and credits onto the individual shareholder for federal tax purposes to avoid double taxation of corporate income.
What is an LLC?
LLCs are another extremely popular business structure. There are approximately 21.6 million LLCs in the United States, according to business law firm Fitzpatrick, Lentz, and Bubba. An LLC, or Limited Liability Company, is a legal business entity that is owned by one or more individuals. These kinds of businesses protect the individual owners' assets like a corporation does because it’s considered a separate legal entity. However, LLCs are not subject to the same level of corporate tax or formality, so they are often preferred by small business owners.
What is an LLP?
An LLP, or Limited Liability Partnership, is a legal business entity that combines aspects of a partnership and a corporation. LLPs are structured and managed more easily than a corporation, but unlike an LLC, operate according to partnership rules. An LLP is formed by two or more partners and each partner enjoys limited personal liability for business debts. The partners' liabilities are limited to the amount they put into the business.
What is an LP?
An LP, or Limited Partnership, is a legal business entity with at least one owner that is considered a general partner who makes business decisions and assumes personal liability for business debts, and one or more limited partners who just invest money into the business while having minimal control over operations and are not personally liable for business debts.
Business sizes
There are three main business size classifications in the United States. These three business sizes are:
- 1Small business - The best small business definition is a business that has a single owner, or small group of owners, with a limited number of employees. Small businesses are typically classified as having fewer than 1,500 employees and a revenue of less than $40 million, according to the US Census Bureau. However, the exact specifications can range depending on the agency defining the term and what function the business performs. What’s certain is that small business is the most common business size in the United States. In fact, the majority of US businesses have fewer than five employees.
- 2Mid-market enterprise - This business size typically has between 1,500 and 2,000 employees and generates annual revenue under $1 billion, according to the employment platform Indeed. Mid-market enterprises are typically privately owned. However, they hire for specialized roles and leverage task delegation to assist ownership in management decisions.
- 3Enterprise - With over $1 billion in annual revenue, the enterprise designation is only for the largest of businesses. These businesses are usually organized as corporations and are structured with specialized departments. Many enterprises are public companies that trade on a stock exchange to improve access to capital funding.
What are examples of business?
How to start a business?
1. Choose a business model
Before you can launch a business, you need to have an idea of what kind of business you want to start. Fortunately, there are many business models to choose from. For example, if you have a trade skill like plumping, you could start your own service business. However, many people are opting for online business models these days because of the convenience and flexibility they afford.
Fortunately, there are many highly profitable online businesses to choose from, like local lead generation. A local lead generation business is easy to start because it has low startup costs and primarily relies on a relatively easy to learn skill in SEO.
2. Conduct market research
Once you decide on a business model, you need to confirm that your business idea is viable and discover how you can differentiate yourself from the competition to win market share. According to the Small Business Administration, your market research should answer the following questions.
- Is there clear demand for the product or service you’re planning to offer?
- How many people would be interested in your offer?
- What is the typical economic situation of your target market?
- Would your business be able to easily reach the target market?
- How many other similar options are available to your potential customers?
- What price point would potential customers pay based on alternative options?
3. Write a business plan
After you’ve thought through what kind of business you want to start and its prospects for success, it’s time to put it down on paper as a business plan. What is a business plan? For those who want to seek outside funding or attract highly skilled business partners, a business plan is an essential document. A business plan is a document that outlines a business's objectives and intended strategies for achieving them.
You can make a good business plan by including:
4. Fund the business
The majority 78% of small businesses are self-funded, according to the Chamber of Commerce. However, in 2024, there are many opportunities to secure funding for a business venture if your business requires capital beyond your immediate means. Outside funding options for a small business include:
5. Complete business formalities
All businesses choose a name and set up a bank account to receive payment, at a bare minimum. However, depending on what type of business you’re starting, you may need to complete additional formalities before starting operations as well, like setting up a legal business entity or obtaining applicable business licences.
Many people decide to set up a legal business entity, such as an LLC, to protect their personal assets. There are also many different types of business licenses you may be required to have. For example, a restaurant needs to obtain health licenses before serving customers, while a wholesale business needs to obtain a reseller's permit from its state of operation.
6. Launch
Make your product or service available on the market. Deliver what you are promising and provide your customers with a positive experience. Generating customer loyalty results in more business opportunities through repeat customers and customer referrals.
Business FAQs
Business process is an activity or set of activities that function to help an organization progress towards and achieve goals. Business processes also help to ensure companies operate according to legal obligations.
Business management involves overseeing the operations of a business, including aspects like finance, accounting, human resource, and marketing.
Business growth is the stage in a business’s lifecycle when it is focused on expansion. Business growth entails increasing market reach to sell more products or services and drive revenue higher.
Business process management coordinates human labor, systems, information and other factors within a business to produce outcomes in support of the business’s operational goals, according to information technology solutions provider Gartner.
Business strategy is the strategic initiative that guides a company in the pursuit of value creation for stakeholders, according to Harvard Business School. A business strategy is a foundational aspect of a successful company because it helps lead the business toward its goals. For example, becoming a freelancer who takes the time to learn how to become a copywriter and focuses on outreach strategies to land high-paying clients.
Business functions are the activities performed by the business in support of its intended purpose. Examples of common business functions include research and development, marketing, sales, accounting and finance, human resources, public relations, production, and general management.
A business owner is a person that controls the operations and money of a business.
Business activity is any type of activity that a business engages in with the primary motivation to make a profit. Business activities consist of operating activities, financing activities, and investing activities.
Business intelligence is the strategies and technologies a business uses in order to analyze information and improve operations. Business intelligence consists of things like business analytics, data mining, and data visualization to make more informed decisions.
A business analyst is the person tasked with leveraging available technologies to perform business analysis for a company.
Business operation is the day-to-day actions a business does in order to properly function and make money. Business operation includes tasks like bookkeeping and financial planning.
Business decision is any choice a business makes that affects its future prospects. An example of a business decision is a leading technology company deciding whether or not to acquire an up-and-coming competitor.
This informative article on the definition, characteristics, and examples of business provides great insights into the dynamics of entrepreneurship. One crucial aspect that shouldn't be overlooked is the role of business plan writing services. These services are instrumental in transforming ideas into well-structured business plans that drive success. With their expertise and market knowledge, they help entrepreneurs navigate challenges, identify opportunities, and secure funding. For anyone starting or expanding a business, leveraging professional business plan writing services can be a game-changer in achieving their goals.