A business is easily defined as any entity or organization that performs commercial, industrial, or service activities for monetary value. Businesses may be either for-profit or non-for-profit entities that conduct business to meet a social cause or further a humanitarian purpose. In recent years, a number of organizations have emerged which claim to promote “social good” through business practices. While some businesses have a pure philanthropic objective, others use their business to make profits in a competitive marketplace.
Business enterprises may be organized for the purpose of meeting and exceeding the economic objectives of the owners. This type of organization exists to accumulate capital, expand market share, reduce operating expenses, create intellectual property or find strategic or financial alternatives to overcome financial challenges. It may engage in a wide range of activities to reach its economic objectives. Business activities may be structured to meet a long or short-term economic objective.
A sole proprietorship is a form of business organization where there is only one person who owns the business and all of its business debts are owned by that person. A partnership occurs when two or more people participate in the business activities of a particular partnership. A corporation is any entity that is registered under the laws of the country. In Canada, there are many corporations that are incorporated in the country.
The differences between a sole proprietorship and a corporation are mainly on the kinds of ownership that one can choose for a business. A sole proprietorship is considered to be an ownerless company. Consequently, it cannot issue shares of stock and cannot have employees unless the articles of incorporation allow such an ownership structure. A corporation, on the other hand, must have at least one shareholder who holds the power to determine the amount of profit that the company makes.
A sole proprietorship does not have many businesses that deliver value to the shareholders. Under this arrangement, the owners of the business do not receive the benefit of the profits of the business because the business is not able to deliver a profit to the shareholders. For example, a sole proprietorship that produces widgets for a large retailer cannot expect to pay the retailer a royalty for the use of its manufacturing processes. The cost of the manufacturing process will be deducted from the retailer’s profit. With this arrangement, a business loses the ability to deliver value to the shareholder. On the other hand, a corporation that engages in several activities, such as manufacturing, can be assured that it can deliver a profit to its shareholders because it delivers many services that can be considered as a benefit.
On the other hand, a corporation that engages in many different activities is more likely to realize a profit because the products it manufactures can be used in a variety of ways to produce profit. There are many services that do not require the processing of widgets in order to provide service to the customer. Examples include utility services, retailing, transportation, and advertising. With these types of services, the corporation is able to capitalize on the activities that can result in the delivery of the goods without having to develop the widget factories needed to deliver the goods. A sole proprietor is unable to realize any profit because it does not have any partner factories outside the scope of the business.
This limitation extends beyond corporations. It also applies to partnerships and limited liability companies. In a partnership, there may be several partners but only one corporation. Under the structure established by limited liability companies, several partners can still have responsibilities to the other partner while the business debts of the partners are split between them.
Limited liability companies offer business owners more freedom than a sole proprietorship or corporation. The business debts of the partners are divided in the same way as the business debts of the owner. Because the company is able to recover its debts from its partners, the owner is not responsible for the costs incurred in the payment of those debts. This allows the owner to concentrate on improving his company and increasing its profitability.