Understanding the Basic Types of Business Entities

A business is defined by Wikipedia as an unincorporated private organisation or entity, usually run by a sole proprietor or group of owners. Most businesses are for-profit organisations or non-profitable public organisations that conduct business to fulfil a social objective or further a political cause. Some businesses are traded businesses, and others are licensed sellers. The most important distinguishing feature of a business is the ownership structure. The rest of this article sets out some of the common elements of a business and examines some of the issues that are frequently raised about business.

It is generally accepted that every business is conducted for profit, with no other purpose in coming into play except that of bringing in more income from the owners. This basic precept of business life is at the heart of modern economic activity and it is also at the root of much popular criticism of business. A businessperson is not just a trader or businessman but also has a responsibility for creating value for the community.

In business, there are three broad categories: trading, production and retail. Within these categories, there are many sub-categories, sometimes overlapping substantially. There is main article devoted to each of these three main categories, giving a detailed account of what the categories mean and what their role is in any business. These main categories are sometimes known as the learning cycles. They include accumulation, development, expansion and elimination.

In terms of the accumulation of wealth, it is the accumulation of surplus production created by a business, institution or company. For example, new plant and equipment bought by a corporation will yield profits for years to come, while a similar transaction with a main article warehouse, will generate income for only a short period of time. Similarly, the accumulation of surplus production in enterprises normally refers to the buying of raw materials, working capital and selling products.

On the other hand, the development refers to the creation of new goods and services, realizing profits from the sale of existing goods and services. For example, the workers of the Ford Motor Company learn how to produce a better car by learning from the various tests conducted. They gain experience and knowledge by participating in the production process. They make valuable contributions to the process of making a better car, as they are able to observe different strategies used by Ford engineers and learn from them. Their knowledge thus forms the basis of the Ford company’s success.

The third category, retailing goods, refers to the provision of products to consumers at a retail outlet. It is often used to refer to the business structure mentioned above. When the price of a good becomes too high, a retailer can reduce its prices and sell his goods in different places; this is called reducing the retailing cost. This technique, which is frequently used by retailers to increase their profit margin, is known as marketing. It is a key strategy employed by many business entities to enhance the profitability of their entity.

There is another type of entity, called the wholesale distribution entity. These businesses are engaged in the business of selling to the end users of the product. They obtain raw materials from manufacturers and then sell these goods to the end users at competitive prices. Usually, wholesale distribution businesses have their own packing and delivery systems. The profit of such businesses comes from the difference between the manufacturer’s price and the price charged by the end users. Thus, they have a very important function in the process of delivering goods to their rightful owners.

All business entities play a vital role in the economic activity of society. They help create employment and wealth for the people. Moreover, it also enhances the efficiency of economic activity. Hence, all businesses should be encouraged, and the profit made by them should be maximized, so that the country’s economy can achieve full potential.

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