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General Information

A business is a commercial enterprise within the economy that undertakes economic activities.

Several different types of businesses exist with different legal rights, goals and activities. The main goal of most businesses is profit maximization, although businesses may also aim to maximize sales, increase market share, provide quality products, provide employment, gain prestige, provide important goods and services to society or be self-employed.

In economics businesses are known as producers and usually belong to the producer sector of the economy. The money that is exchanged by a consumer for goods and services from the business is known as sales revenue. This is usually able to cover the costs of production, including rent for land, capital investment and wages for workers.

The remaining revenue will form profit, which is earned for entrepreneurship. Entrepreneurship is the organization of resources to produce a product, which is essential for starting and operating a business.


Types of Businesses

Businesses may be classified in several ways:

  • Sectors

    • The primary sector of businesses that extract or harvest natural resources.

    • The secondary sector of businesses involved in processing and manufacturing.

    • The tertiary sector of businesses that provide services. The production process of these businesses is labour-intensive and produces an intangible product.


  • Ownership and legal rights


    • A sole trader or sole proprietorship is a business run by a single individual. The individual provides the business with all the finance required. They are legally considered the same entity as the business. As a result, the business has unlimited liability and the individual must pay business debt off with personal assets.


    • A partnership is a business started by two or more people. In a partnership profit will be shared equally or as agreed and all management decisions will need majority support. A General Partnership will have unlimited liability, meaning all partners are personally liable for the actions of any other partner and must use personal assets to pay off business debt. In a Limited Partnership silent partners who do not contribute to the management of the business are not personally financially or legally liable for the business.

    • Corporations are totally independent legal entities. They have limited liability, meaning their owners are not personally liable and do not have to use personal assets to pay off business debt, apart from the personal assets they invest in the business. A corporation also continues indefinite regardless of the death of an owner, director or officer of the business.
      • In some countries Limited Liability Partnerships may be formed which have many similarities to a partnership, but have limited liability.

      • Shares of a Public Limited Liability Company (PLC) are publicly traded, usually on a stock exchange. The owners of the business are members of the public who do not lose personal assets apart from those they invest in the company because the company has limited liability. Shareholders appoint a Board of Directors, who appoint a overall manager called a Chief Executive Officer.

      • Limited Liability Companies, LTDs or Incorporated businesses who do not have publicly traded shares but are registered companies that have limited liability. Shareholders appoint a Board of Directors, who appoint a overall manager called a Chief Executive Officer.

    • A co-operative is an independent legal entity owned by a group of consumers or producers. Consumer co-operatives work for the benefit of consumers, while producer co-operatives work for the benefit of producers. Producer co-operatives, such as a retailers' co-operative, can create an economy of scale with benefits such as cheaper prices from suppliers and shared marketing costs.

  • Management Structures

    • Centralised management structure.

    • Decentralised management structure.

  • Industries are groups of one or more businesses that are involved in the same production process or a similar production processes. Industries may be also be called areas of business, business sectors, trades or professions.

Related Public Forum Threads

Best Ownership Type - General discussion about business ownership types.


Discuss this topic at Open Site Talk

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