A business is defined by the US Bureau of Labor Statistics as any company or entity conducting specific activities for profit. Companies may be for-profit enterprises or non-profitable ones that conduct primarily to meet a social objective or further a charitable purpose. The value of a business is also determined by the output and profit that it produces. If a business is conducting several activities to meet various objectives, then it is also called a multi-purpose enterprise.
Multi-purpose enterprises include grocery stores, computer companies, bookstores, hotels, transportation services, builders, restaurants, banks, insurance firms, computer networking companies, insurance providers, loan companies, media production and distribution, technology development, packaging manufacturers, and others. In addition, many businesses are now conducting online activities such as online shopping, web conferencing, online advertising, and others. All these activities bring in their own profits. However, in order to maximize profits, it is important to develop a good business strategy.
Many businesses today choose the option of incorporation to form a legal structure on the basis of an operating agreement. For example, a sole proprietorship is established by a written contract between two parties. Under such a legal structure, the responsibilities of each party are specified in the operating agreement. All matters related to business operations such as profit sharing, capital assets, property liabilities, and business debts are contained in the operating agreement. A nominee service is also included to make appointments for the directors and the shareholders.
Limited liability companies are established to carry on limited business activities. Under this setup, the responsibilities of the general manager of the enterprise are assumed by the LLC. The main advantage of such an entity is that only a limited number of people will be involved in managing the business. Limited liability companies do not have to worry about lawsuits and customer complaints regarding their operation.
Corporations are set up as a legal structure in which one business controls all other businesses under its umbrella. It is usually set up for the benefit of a single shareholder. However, there is a drawback to corporations. They are difficult to manage and are susceptible to ups and downs in the overall market. The benefits include a set rate of taxation and are considered relatively risk free.
For many businesses, incorporating is a wise decision as it offers numerous advantages such as avoiding double taxation, enjoying legal protection from lawsuits, and having a stable economic structure. However, incorporating may not be the right choice for some businesses. Small business owners should evaluate the needs of their businesses and consult with a tax consultant to determine the best course of action in setting up a corporation. While incorporation is a complex process, it provides a sense of security to businesses and immediate monetary rewards if the need arises.