Concept of Business

Concept of Business

Business as economic category

Business is the relations between participants of the market concerning their joint activities aimed at profit earning (or other forms of income) from capital utilization.

Business — the initiative economic activity performed at the expense of own or borrowed funds on the risk and under the responsibility, setting as main goals income acquisition and development of own business.

Of business as the capitalist relation it is characteristic:

  • availability of the original capital invested in this or that case;
  • purposeful nature of an investment of the original capital — profit earning (income) on the invested capital;
  • establishment of certain relations with other participants of the market concerning capital utilization (both initial, and subsequent).

The economic relations which individuals enter, being engaged in business, are so difficult and many-sided that don’t allow to determine borders of these activities accurately. Therefore business activity is determined as a legal concept.

Business is always legally arranged human activity which can be performed only within one of the managing forms established by the law.
Structure and subjects of business

Individual owners of the equity — physical persons and also owners and owners of the entities, speakers as legal entities can be subjects of business (businessmen) free in the actions in the market.

In the countries with market economy hundreds of thousands of people, solely or groups, risking an equity, annually open the new entities.

Often illegally mix the concept “business” with the concepts “entrepreneurship” and “commerce”.

Business is any kind of activities in the sphere of social production, revenue-producing or other personal benefits. But economic activity can be performed in the sphere of material and non-material production. Therefore it is more correct to subdivide business into an entrepreneurship (economic activity in the sphere of production of goods) and commerce (economic activity in the non-material sphere). Material benefits (goods), and commercial — the non-material benefits (services) are result of business activity.

Business can be performed in three main forms:

  • individual or private entrepreneurship;
  • partnership;
  • corporation (joint-stock company).

Individual entrepreneurship is called business which owner is one person. The owner of individual business at the same time performs functions of the manager. It is the most common form of business characteristic of small shops, the entities of service trade, farms, professional activity of lawyers, doctors, etc.

Partnership is called business which is owned by two and more persons. Advantages of partnership are that it is easy to organize it, consolidation of partners allows to raise additional resources and the new ideas.

Are among shortcomings:

  • Limitation of financial resources;
  • The ambiguous understanding is more whole than partnership activities by its participants;
  • Difficulties of determination of a share of each participant in income and loss of a partnership, in the section of the property purchased together.

Corporation is called the set of the persons united for joint business activity as the single legal entity. The right to the property of corporation is divided into parts according to shares. Therefore owners of corporations are called shareholders, and corporation — joint-stock company. Owners of corporations bear the limited liability on corporate debts determined by their deposits to shares.

Carry to number of benefits of corporations:

Unrestricted opportunities of attraction of the money capital through sale of shares and bonds;
separation of shareholder rights on property and personal.

Treat shortcomings of the corporate form of the organization of business:

  • double taxation of that part of income of corporation which is paid in the form of dividends to shareholders: first time as part of profit of corporation, and second time as part of a personal income of the shareholder;
  • favorable opportunities for economic crimes. Release and sale of shares, not having any actual cost is possible;
  • separation of functions of property and control. In corporations which shares are sprayed among numerous owners function of control comes off function of property. Shareholders are interested in the maximum dividends, and managers try to reduce them to put money into circulation.

There are also other shortcomings of corporations, but their benefits prevail over shortcomings.

admin