Business is a broad term that covers a variety of endeavors in business. A business is usually defined as any entity organized for the purpose of conducting commercial, investment, or other economic activities. Businesses may be either for-profit or non-profitable entities that operate with the sole purpose of meeting a social cause or furthering a social agenda. Other types of businesses include retail, information technology, and the service industries. Business activities may be public or private; the specific activities of a business generally depend on its nature and objective.
Developing an effective business plan is essential in ensuring the success of one’s ventures. In order to ensure the success of any business venture, it is essential for the entrepreneurs to develop a sound business plan that clearly states the overall goals of the venture as well as the methods to achieve these goals and objectives. A clear understanding of the requirements needed to successfully carry out the business operations is also needed in order to avoid overlooking any necessary processes that are required to be carried out by the business. Business process modeling or BPM is one such process that seeks to identify the business processes that need to be developed in order to run the business successfully.
There are many businesses that fail to succeed mainly because they lack a solid business plan that is developed according to the business requirements. Business plans can help in identifying the appropriate legal structure to be adopted for any business, be it a corporation, limited liability company (LLC), partnership, or any other legal structure. These legal structures enable the business to legally protect its assets and liabilities, and enjoy optimal levels of efficiency and effectiveness. Without a proper business plan, many businesses are unable to adapt to changing market conditions and economic conditions.
One legal structure that many businesses enjoy is the limited liability partnership (or LLC). Limited liability partnerships enjoy the benefits of greater flexibility than most corporations. Under such a business structure, partners pay taxes only on the income they receive and only a portion is liable to pay taxes. In some countries, an unlimited liability partnership (or LLC) is permitted.
Limited liability partnerships are often used as a vehicle for investment. The concept is quite useful in cases where an entrepreneur is unable to solve his/her business problems on their own but is willing to finance the cost of another company. In such cases, the partner takes on the responsibility of the whole company, but is only responsible for his/her part of the liabilities. The partner’s contributions are thus used as capital to fund the other company’s activities, eliminating the need for further financing.
Another option that many businesses enjoy in the United States is the incorporation of an entity. An entity can be a corporation, partnership, limited liability company (LLC), or sole proprietorship. Many businesses prefer the entity solution over the individual solution because the structure provides them with a legal entity. Some argue that an entity is preferable because it can protect the personal rights of the founder or the management, unlike sole proprietorships, which give rise to possible lawsuits. For example, in a partnership, one partner can open a credit facility which could potentially harm the other partner.
There are two main options in incorporating businesses. One solution is the business organization solution. With this solution, businesses form one business unit with one owner. The other option is to use the limited liability companies solution, which allows for several ownerships within a single business organization. Some jurisdictions allow for both solutions; some do not. One major difference between the two solutions is that, with business organizations, there is a main company that makes all decisions, while the limited liability companies permit the partners to make their own decisions under certain constraints.
The U.S. tax code allows for a tax break for businesses that incorporate themselves rather than through limited liability partnerships (LLPs). As an important aside, businesses formation does not always result in a tax break. If a business form a corporation rather than an LLC, the IRS will deem it a disregarded entity and the owner will not be required to pay tax on his share of the company’s income or profits. However, if the business form an LLC, the IRS will treat the LLC as a separate entity and will require the LLC owner to pay tax on his share of the profits. Businesses formation through an LLC does not avoid tax liability completely, but it can significantly reduce it. This is especially true for small business owners who may be operating their businesses out of their homes, since they are rarely classified as sole proprietors by the IRS and do not have to pay the standard tax rate.