1. What is Business?

Human beings are continuously engaged in some activity to satisfy their unlimited
wants. Every day we come across the word 'business' or 'businessman' directly or
indirectly. The business has become an essential part of the modern world.
All of us need food, clothing, and shelter. We also have many other household
requirements to be satisfied in our daily lives. We met these require ments from the
shopkeeper. The shopkeeper gets from wholesaler. The wholesaler gets from
manufacturers. The shopkeeper, the wholesaler, the manufacturer are doing business
and therefore they are called as Businessman.
According to Stenford
“Business is all those activities involved in providing the goods and services needed
or desired by people”. It  means a business activities called that activities ,which
provide goods or services required and desired by persons of our society .

According to Musselman and Jackson

” An activity that meets the needs and desires of the community economic and
organized a company to engage in such activities.”
So, as a combined and full defination we can defined business as a economic
activitiy concentrated with satisfying human need by the continuos production and
distribution of goods and services..
2) What are the function/features of business
1. Exchange of goods and services; All business activities are directly or indirectly concerned with
the exchange of goods or services for money or money's worth.
2. Deals in numerous transactions; In business, the exchange of goods and services is a regular
feature. A businessman regularly deals in several transactions and not just one or two
transactions.
3. Profit is the main objective; The business is carried on with a motive to earn a profit. The profit is
a reward for the services of a businessman.
4. Risks and Uncertainties; Business is subject to risks and uncertainties. Some risks, such as risks
of loss due to fire and theft can be insured. There are also uncertainties, such as loss due to change
in demandd or fall in price cannot be insured and must be borne by the businessman.
5. To satisfy human wants; The businessman also desires to satisfy human wants through the
conduct of business. By producing and supplying various commodities, businessmen try to
promote consumer's satisfaction.
6. Social obligations; Modern business is service-oriented. Modern businessmen are conscious of
their social responsibility. Today's business is service-oriented rather than profit-oriented.
 3)Importance of Business
 1. Economic development:
Business is important for economic development. Concept of true business is used in industries and
commerce. Industries use men, money, materials, methods and machines and help to create
employment. It helps to earn foreign currency by export business too. Therefore, business helps in
economic development
 2. Utilizing natural resources
Every country has diverse natural resources. Business must be directed towards proper and efficient
utilization of resources. Business utilizes the resources like water, minerals,   ores and so to achieve
its own goals. But resources must be utilized without exploitation.
 3. Creation of utility:
Business creates place and time utility. It helps to satisfy the needs of human beings. Financial
utility is to be maximized.
 4. Employment:
Business helps to provide job to people. It provides various types of managerial or technical job.
Many types of business houses like hotels, industries, and transport companies are established for
business which helps to solve the unemployment problem.
 5. Revenue generation:
Business is the source of revenue generation. It pays taxes, royalties, fees, custom duties, and other
things which help to generate government revenue.
Forms of business organaizations
 Before you consult with a tax advisor or consultant you may want to do
some research yourself. One of your first decisions as a business owner is
what form of business you choose. This decision is very important
because it can affect how much you pay in taxes, the amount of
paperwork your business is required to do, the personal liability you
face and your ability to borrow money. Business formation is controlled
by the law of the state where your business is organized.
 The most common forms of businesses are:
 Sole proprietorship
 Partnerships form
 Joint stock company
 Co operative organization
 Multinational forms
Sole trading organization

 A sole proprietorship is the most common form of business organization. It's easy
to form and offers complete control to the owner. But the business owner is also
personally liable for all financial obligations and debts of the business.

As a sole proprietor you can operate any kind of business as long as you are the
only owner. It can be full-time or part-time work. This includes operating a:

Shop or retail trade business

 Large company with employees
 Home-based business
 One-person consulting firm
 Every sole proprietor is required to keep sufficient records to comply with federal
tax requirements regarding business records.
 Features of sole trading concern
 Single ownership:
A sole proprietorship is wholly owned by one individual. The individual supplies the total
capital from which his own wealth or from borrowed funds.
 2. One man control:
The proprietor alone takes all the decisions pertaining to the business. He is not required to
consult anybody. Ownership and management are vested in a person.
 3. No legal entity:
A sole proprietorship has no legal entity separate from its owner. The law makes no
distinction between the proprietor and the business. The assets and liabilities of the business
and its proprietor are not different.
 4. Unlimited liability:
Proprietor is liable for all the debts of the business. In case the assets are insufficient to meet
the debts, the personal property of the proprietor can be attached.
5. No profit sharing:
The proprietor is all alone entitled for all the profits and the losses of the business. He bears
the complete risk and there is nobody to share the risks, workload or any profit or losses.
 6. limited area of operation: since the sole trading concern is established by the investment
of a single person ,there is less scope of expansion and growth of it. sole trader cannot
manage big size of business individually.
Partnership organization

• A partnership is the relationship existing between two or more

persons who join to carry on a trade or business. Each person
contributes money, property, labor or skill, and expects to share in the
profits and losses of the business.

Each partner reports his share of the partnership net profit or loss on
his personal tax return. Partners must report their share of
partnership income even if a distribution is not made.

Partners are not employees of the partnership and so taxes are not
withheld from any distributions. Like sole proprietors, they generally
need to make quarterly estimated tax payments if they expect to make
a profit.
 Feature of partnership
 1. More Persons:
 As against proprietorship, there should be at least two persons subject to a maximum of ten persons
for banking business and twenty for non-banking business to form a partnership firm.
 2. Profit and Loss Sharing:
 There is an agreement among the partners to share the profits earned and losses incurred in
partnership business.
 3. Contractual Relationship:
 Partnership is formed by an agreement-oral or written-among the partners.
 4. Existence of Lawful Business:
 Partnership is formed to carry on some lawful business and share its profits or losses. If the purpose
is to carry some charitable works, for example, it is not regarded as partnership.
 5. Utmost Good Faith and Honesty:
 A partnership business solely rests on utmost good faith and trust among the partners.
 6. Unlimited Liability:
 Like proprietorship, each partner has unlimited liability in the firm. This means that if the assets of
the partnership firm fall short to meet the firm’s obligations, the partners’ private assets will also be
used for the purpose.
 7. Restrictions on Transfer of Share:
 No partner can transfer his share to any outside person without seking the consent of all other
partners .however transferring share is possible but there are certain restrictions when some one tries
to transfer his/her share
 Joint sock company
 A joint-stock company is a business owned by people
called shareholders. Each shareholder owns company stock
in proportion to the number of their shares (certificates of
ownership). Some shareholders may own a larger
proportion of a company's share than others. Shareholders
are able to transfer their shares to others without any
effects on the continued existence of the company...
 In another words joint stock company is a volantary
association where capital or funds is collected by selling of
transferable shares among large number of individuals
called shareholders.
 Feature of joint stock company
1. Artificial Legal Person
A company is a legal entity that has been created by the statues of law. Like a natural person, it can do certain
things, like own property in its name, enter into a contract.borrow and lend money, sue or be sued, etc. It has
also been granted certain rights by the law which it enjoys through its board of directors.
• 2] Separate Legal Entity
• Unlike a proprietorship or partnership, the legal identity of a company and its members are separate. As soon
as the joint stock company is incorporated it has its own distinct legal identity. So a member of the company
is not liable for the company. And similarly, the company will not depend on any of its members for any
business activities.
• 4] Perpetual Succession
• The joint stock company is born out of the law, so the only way for the company to end is by the functioning
of law. So the life of a company is in no way related to the life of its members. Members or shareholders of a
company keep changing, but this does not affect the company’s life.
• 5] Limited Liability
• This is one of the major points of difference between a company and a sole proprietorship  and partnership.
The liability of the shareholders of a company is limited. The personal assets of a member cannot be
liquidated to repay the debts of a company.
• 6] Common Seal
• A company is an artificial person. So its day-to-day functions are conducted by the board of directors. So
when a company enters any contract or signs an agreement, the approval is indicated via a common seal. A
common seal is engraved seal with the company’s name on it.