A business is defined as an organization that offers products or services for sale to various groups of consumers, which include the general public, other businesses, and governments. It should be legally approved by the law before it goes into operation. Businesses are an important part of a capitalist society where individuals and groups participate in the selling of products and services to make profits. Running a business will usually involve some form of risk, with investment of capital and payment of expenses. Every business requires a market, and its products and services have to appeal to the needs of its target consumers. While the primary objective of a business is to make profit, it is also the responsibility of a business owner to ensure that his goods and services are safe for use and beneficial to his customers.

Types of Businesses

Businesses exist in different forms, and they serve different purposes to maintain the functioning of an economy. The major types of businesses include manufacturers, retailers, distributors, service businesses, financial businesses, utility businesses, real estate businesses, agricultural and mining businesses, information businesses, and transportation businesses. Within these forms of businesses, there are many sub-types that serve specific purposes, such as apparel, entertainment, machineries, jewelry, food and beverages, accommodations, healthcare, and others.

- Manufacturers

Manufacturers are businesses that turn component parts or raw materials into finished products. These products are then sold to retailers or distributors for a profit. Most of the products that are available in the world are produced by manufacturers, including cars, clothes, processed foods, machineries, electrical goods, and others. The larger manufacturers produce goods in greater quantities and they can afford to sell them at lower prices.

- Distributors

Distributors function as a link between manufacturers and retailers. They will get the goods from the manufacturers and look for suitable retailers to sell the goods to the public. The retailers are shops or department stores where the goods are displayed for the end-consumers to purchase. Both distributors and retailers will charge distribution fees or mark up the prices of the goods to make profits.

- Service Businesses

Service businesses are organizations that gain profit in exchange for the provision of services to consumers. Fees will be charged according to the type of services that are required by the consumers. Examples of service businesses are consulting businesses, entertainment businesses, and restaurants.

- Agricultural and Mining Businesses

Usually, heavy machineries and large land spaces are required for such businesses. The raw materials will either be sold directly to the public or to manufacturers for a profit. Some of the raw materials that are gathered by agricultural and mining businesses include fruits, plants, and minerals.

- Financial Businesses

Financial businesses make profits by charging a certain commission or service fee for offering investment services to the general public. Banks and financial institutions are examples of financial businesses. Information businesses are mostly organizations that make profits by reselling intellectual property. Publishers, film studios, and software package companies are considered information businesses.

- Real Estate Businesses

Real estate businesses are involved in the renting, sale, and construction of houses, buildings, and other properties. Such businesses make profits by earning commissions from the rent or sale of rooms, houses, or buildings, or selling properties that they develop. Utilities businesses are usually owned by governments. They provide public utilities such as electricity, heat, and water. Transportation businesses offer transportation services to carry passengers or deliver goods from one place to another, and they make their profits by charging transportation fees.

Types of Business Ownership

There are different types of business ownerships too, and they are usually determined by the size of the businesses and their capital investment. The basic types of business ownerships as recognized by the law are sole proprietorship, partnership, corporation, and cooperative.

- Sole Proprietorship

In a sole proprietorship, the business is owned by an individual. The decision making is performed by the owner, and he can decide to run the business himself or hire other people to run it. If the business is in debt, the owner will have full personal liability of all the debts.

- Partnership

A partnership has two or more owners, who have the same intention of generating profit for the business. The owners will share the responsibility of making decisions and they have personal liability of all the debts that result from the partnership. Partnerships are categorized under three main types, namely, general partnership, limited partnership, and limited liability partnership.

- Corporation

A corporation is a business that has limited liability. The members of a corporation have different legal responsibilities, but they share the same goal of making the business a profitable entity. In a corporation, the business is owned by shareholders, and it is overseen by a board of directors, who will hire people to perform managerial tasks.

- Cooperative

Similar to a corporation, a cooperative also has limited liability. However, it is different in the sense that the decision making is performed by its members rather than its shareholders. The two major types of cooperatives are consumer cooperatives and worker cooperatives. Cooperatives are considered the ideal business structure for the economy of a democratic society.

The Organizational Aspects of Business

Most sizable businesses have different departments to manage their operational duties. Usually, the departments that make up a business organization include human resources, finance, marketing and sales, operations, administration, communications or public relations, procurement, internal audit and management. There are some businesses that have research and development and information technology departments as well.

The finance department handles the financial activities of the company. It usually comprises of several divisions, including budget and forecasting, management of cash and treasury, accounting, tax planning and reporting, risk management, and external and internal reporting. The budget and forecasting division will plan out of the budgets of the company’s activities, while the cash and treasury division will make sure that money is available when the company needs it. The accounting department will pay the money that the company owes and receive money that is paid to the company. The company’s responsibilities to the government are carried out by the tax planning and reporting division, whereas the risk management division calculates all the risks that are involved in the company’s activities. The external and internal reporting division will provide financial and other reports to give better transparency to those who want to know the company better.

The human resource department is in charge of the employment procedures of the company. It takes care of the payroll, hiring, firing, benefits, and other aspects that are related to the well-being of the employees. The marketing and sales department will promote and sell the products or services of the company, and maintain good relationship between the company and the customers. The production of goods and provision of services of the company are managed by the operations department, while the procurement department will obtain the products and services that are needed by the company.

The administration department of the company will support the other departments of the company by performing administrative tasks such as typing, filing, and others. The company’s dealings with external entities are managed by the communications or public relations department, whereas the internal audit department will give a summary of the performances of the other departments of the company to the board of directors.

Some manufacturing businesses have research and development departments to help them develop new products and test their effectiveness and viability. As businesses are becoming more dependent on computers, many companies have information technology departments to attend to their computer systems and data management. The management department is not always considered a department within the company. It is made up of the leaders of a company who play different roles to ensure that the company is operating efficiently.

Setting Up a Business Organization

Before a business is set up, there are several factors that have to be considered. Firstly, the size and scope of the business have to be determined, so that the management and ownership structures can be clearly defined. Basically, a business that is smaller in size has better flexibility, while a bigger business will have a more rigid structure and require a more extensive organizational system. Secondly, due consideration has to be given in regard to the sector or country in which the business is proposed to operate. There are different structural and legal requirements for private and governmental businesses, so it is essential that a business owner knows which sector he wants to do business in. Different countries also have different laws for the setting up and operation of businesses. The limited liability of a business is also important. Owners of certain forms of businesses, such as limited liability partnerships and corporations, are entitled to legal protection if their businesses fail. A business owner should also look out for tax advantages that are available for his type of business structure. There are also laws governing the release of information to the public, and a business owner has to be well-aware of the rules and regulations that apply.

Businesses have become an integral part of every society. In fact, the well-being of the people depends heavily of how businesses contribute to the success of the economy. Businesses are entities that benefit both the business owners and the consumers, and they are the reason why societies are functioning and advancing.