Business Tips and Insights

The term business usually refers to an organization that produces a certain commodity and obtains profits through its sales. Sometimes business is also used to refer to the act of carrying out any kind of transaction. In today’s scenario, business essentially refers to independent ventures by entrepreneurs, who wish to break the shackles of a 9 to 5 job stereotype and carve out a niche for themselves.

A business or a firm is a legally recognized organization that provides either products or services to its customers. Businesses started flourishing in capitalist economies. It still continues to thrive mostly in capital economies. A business may have various types of ownership.

A person may alone be in charge of a huge business empire. In this case, the ownership type is known as sole proprietorship. The owner here is alone in charge of the entire firm (business organization) and has the right to take all decisions regarding his business venture. He is the legal head of his firm or company and has paid employees working under him.

The second type of ownership is known as a partnership. As the name suggests, partnership refers to an alliance between two or more people who jointly own and run a business venture. Each partner has his share in the business and also has certain responsibilities in the venture. They jointly operate for a common goal and try to achieve profit. Each partner also has the liability of any kind of debt incurred by the venture. Partnerships can be broadly classified into 3 types. These are general partnerships, limited partnerships and limited liability partnerships. Usually partnerships are given more preference over sole ownerships as they distribute the work and responsibility among a number of people instead of concentrating the entire pressure on one single person.

The third type of business ownership is known as a corporation. A corporation is a limited liability venture. However, unlike other forms of ownerships, a corporation has a separate legal personality from its members. A corporation maybe a profit or a nonprofit venture. The ownership of a corporation usually rests with multiple share holders. A corporation is generally overseen by a board of directors. This board of directors hires the business’s managerial staff. They look after the recruitment of managerial employees. Corporate ventures can be both state owned as well as private owned.

The fourth type of ownership is known as a cooperative. A cooperative, like a corporation, is a limited liability entity. As similar to a corporation, a cooperative may also be profit or nonprofit. However, a cooperative has members unlike a corporation which has share holders. These members also contribute to the decision making procedure. Cooperatives can be further divided into two categories. These are the consumer cooperatives and the worker cooperatives. Cooperatives are utmost importance as far the ideology of economic democracy is concerned.

A very important term that comes to our mind while discussing business is “capital”. Capital is essentially the money that is required to initiate or raise a business. The magnitude of this capital will obviously depend on the type of venture being initiated. However, capital today, is not only limited to the definition of money. Capital, in a broad sense, encompasses all factors that are necessary for a business to start and flourish. For e.g. any kind of raw material required in a business is also a sort of capital. Thus capital covers a lot of avenues in terms of resources.

Capital has been categorized into the following groups for simpler understanding.

Human capital: the amount of man power required to start and sustain a business venture is known as human capital. It is sometimes also referred to as knowledge capital or intellectual capital when only the ideological inputs are concerned. Human labour required is also referred to as human capital with respect to a business.

Social capital: social capital refers to the bond between the individuals in an economy. It is essentially the network trusting relationship between the concerned people. It gives an idea as to how viable a particular society or group is for the business venture to flourish.

Individual capital: individual capital means the capital inherent in the persons constituting the business group or community. Some concepts which sort of draw a parallel with individual capital are talent, ingenuity, leadership, trained personnel and innate skills. In lay man terms, individual capital is also termed as labour.

Financial capital: it represents obligations in the business. It is generally personified as the money liquidated for the business venture. It is protected by strict commercial laws. It is usually in the form of capital assets.

Natural capital: these are capitals obtained due to a flourishing ecology. For e.g. a business plan aiming to implement a hydro electric plant may use the water of a river in the community as its natural capital. Not much monetary expenditure is required to obtain natural capital.

Infrastructural capital: these consist of the non natural support systems. These generally define roads, shelter, clothing, etc. Some of it also arises from the available natural capital.

Another important concept regarding business is the term “exit plan”. Businesses can be bought or sold by an individual or a group of people (community). Business owners refer to the plan of business disposal as the exit plan. Some common exit plans are IPOs, MBOs and merger plans with other companies. IPO stands for initial public offering and MBO stands for management buyout.

These were in nutshell, some basic key concepts regarding business. In order to broaden one’s horizon and increase the storehouse of knowledge regarding business, one should read good economic dailies and follow the business news. This should be done on a daily basis in order to bear fruit. This will definitely help one in enriching his or her knowledge of business and economics.