Business is a word that is commonly used in many different languages. But what does it mean? The concepts and activities of business have increased in modern times. Traditionally, business simply meant exchange or trade for things people wanted or needed. Today it has a more technical definition. It is the human activity related to material things. It is found in all societies; even the simplest ones. One definition of business is the production, distribution, and sale of goods and services for a profit. It can also provide financing for these activities. Landing money, trading stocks and bonds and selling insurance polices relate to the securing of capital for business activities. Other forms of business include merchandising, which is the selling of products and providing various services, such as accounting, distributing and repair. To examine what the term business means, we will look at its various parts.
First, production is the creation of services or the changing of materials into products. One example is the conversion of iron ore into metal car parts. It is necessary to understand the four basic factors of production: land, labor, capital, and entrepreneurship. What do those four terms mean? The term land is used in most general way. It refers not only to a piece of real estate where we might build a factory, but it also means all the raw materials used for the production. Labor refers to the use of mental or physical work to produce goods. The most general meaning of capital is wealth or money. Putting together land, labor and capital to make products, is called entrepreneurship. Next, these products need to be moved from a factory to the market place. This is known as distribution.
Third is the sale of goods and services. Sale is the exchange of a product or service for money. A car is sold to someone in exchange for money. Goods are products that people either need or want; for example cars can be classified as goods. Services, on the other hand, are activities that a person or group performs for another person or organization. For instance, an auto mechanic performs a service, when he repairs a car. A doctor also performs a service by taking care of people when they are sick.
Business, then, is a combination of all these activities: production, distribution, and sale. However, there is one other important factor. This factor is the creation of profit or economic surplus. A major goal in the functioning of a business company is making a profit. Profit is the money that remains after all expenses are paid. Creating of an economic surplus or profit is, therefore, a primary goal of a business activity.
THE SMALL BUSINESS. Many of larger businesses in the UK are public limited companies, which means that the public is able to buy and sell their shares on the Stock Exchange. Such companies have the letters plc after their name, and examples include Marks and Spencer, Guinness and the companies with the financial strength of about $ 500,000. This makes it an unsuitable choice for small businesses, which are more likely to take one of the following forms:
Sole Trader or Sole Proprietor. It is the simplest way of starting a business. You are self-employed and entirely responsible for all aspects of running your own business. This is especially suitable for small retail businesses.
Partnership When two or more people want to start a business together they can set up a partnership and agree on how the business will be operated. All partners are responsible for the debts of the partnership and profits and losses are shared between them.
Private Limited Company. A company can be formed with a minimum of two people becoming its shareholders. In order to establish such a company, specific administrative procedures must be followed. For example, the shareholders must appoint a director and a company secretary. If the company goes out of business the responsibility of eachshareholder is limited to the amount of money that they have contributed. A private limited company has the letters Ltd. (Limited) after its name.
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