A business is much more complex than just the word “business.” It can be defined by any number of different circumstances. To simplify a complex business, however, we’ll focus on some of the most common characteristics. If you don’t fully understand what a business is and how it relates to your life, here’s a quick rundown of the most important characteristics found in successful businesses.
A business is defined by an entity or person who carries out commercial, professional, or industrial activities with the intent to generate income. Most businesses are either for-profit or non-profitable organizations that work to meet a social purpose or further a religious charity. There are amazing discoveries that suggest there are countless types of businesses, each uniquely capable of producing income while fulfilling a meaningful purpose. The most successful businesses have remarkable systems in place to maximize productivity, reduce waste, and maximize profits. Many people call these remarkable systems “business systems.”
A business operation needs to profit in order to sustain itself and maintain employees. Most people are highly motivated when their business produces results that help them improve their lives. But some business owners may need to earn additional revenue in order to provide their employees with excellent compensation and benefits, or to provide a competitive advantage over other companies with less favorable business practices. Even in businesses that are profitable, there are typically advantages to owning a company rather than conducting it as a sole proprietorship.
One of the most advantageous advantages of being a corporation is the ability to pass taxes through its profits to the government. Many business owners feel reluctant about this aspect of being a private company because they believe they do not have unlimited resources. However, corporations have various ways to “pass” these taxes onto the individuals who pay them. Corporations may use their profits to create multiple shareholder’s equity, they may use dividends to provide employees with additional capital, or they may use the money for any number of reasons.
Another advantage of being a corporation is limited liability. A corporation is able to limit its personal liability to its shareholders. A sole proprietorship is liable to only its owner for all of its debts and liabilities. The limitations inherent in the nature of a corporation prevent personal assets from being drained by the business’ creditors.
Perhaps the most important advantage of being a corporation is the tax benefits that it enjoys over a sole proprietorship or a partnership. In both of these structures, a partner’s personal assets are protected from being taxed by the business organization itself. This shield from taxation is referred to as “income taxes.” The income taxes that a sole proprietor or a partnership will be required to pay may be higher than the taxes that a corporation will have to pay. This is because the corporation income is untaxed. The federal tax law allows businesses to exclude their own personal