Nature of business is a broad terminology that can be defined varyingly from various angles. Well, we all are considerably familiar with the term business.
The nature of business is a statement that involves the products or other services provided by the company, its structure, and other peculiar qualities of the business. It primarily comprises the overall purpose of the existence of the business organization.
It can be most suitably defined as an organized industry that offers products or services to its consumers for the means of profit.
Deep Explanation of nature of business
But when we come to the Nature of Business, there are multiple perspectives and views to consider. Let’s have a view on them.
Have you ever noticed a number of different types of businesses all around you on your way? On passing by a street in search of some delish eats, a big Burger King eatery, Starbucks, Domino’s pizza, and Mc Donald’s restaurants will be the first to water-full your mouth.
These are a few foodservice businesses that are most close to you and your tummy. You will definitely be confused about picking the one among these renowned names.
Keeping the food aside, let’s turn back to our business.
Many businesses furnish a variety of products to their customers such as electrical appliances, architectural goods, clothing items, musical instruments, medical equipment, and grocery products, etc. Others offer diverse types of services to their consumers. Beauticians, physicians, lawyers, musicians, engineers, professors, designers, writers, and many others provide their services.
They all have their own nature of business.
- What Is Meant By Nature Of Business?
In other words, the nature of business is a systematic method that comprehensively describes a company. It highlights the types and purposes of a business coupled with the strategies followed by the entrepreneurs to meet their goals.
The nature of business gathers up a few elements in its means.
- The business types
- Business sector
- Organization setup
- Product or services offered
- Nature Of Business: Goods and Services
Nature of business mainly considers the following:
- Products and services offered by a company
- The industry under which the company is being operated
- The overall aim of an organization
The nature of the business can be explained from different perspectives. It can be classified on the basis of organization and the industry under which the company is being operated, moreover, on the basis of business dealings and offerings.
Let’s make it easy by categorizing them.
- Types Of Businesses organizations
A partnership is a formal agreement between two or more individuals to run their businesses together. Each partner shares the total profit and will also be responsible for losses and debts.
There are two types of partnership:
- General Partnership
In a general partnership, both the partners utilize their money and strengths, and at the same time, both will be liable for their business debts. It doesn’t essentially need a legal contract.
- Limited Partnership
Limited partnership necessarily requires a formal agreement. The partners will assume liability for business debts according to their contract and investment.
Sole Proprietorship is the most common type of business that is owned and underlined by only one individual. It is the best option while starting your own small business as it requires less initial cost.
Unlike corporation and partnership, the owner himself is entirely responsible for his business. In this way, the owner has the flexibility to run his business according to his requirements and preferences.
Tax distractions are relatively low, and it is easy to establish within limited resources.
A corporation is a company that is authorized as a single legal entity created by its shareholders. When the owners incorporate their company, it signifies that they have released themselves from their liability over company debts or legal disputes. A corporation is more complicated than other business organization types.
There are three types of a corporation:
- C Corporation:
It is more common among other corporation types. In this type, your income is taxed twice. Firstly, as a business entity, and secondly, when owners get their profits, they are taxed individually.
- S Corporation:
This type of corporation is an effective way to avoid double taxes; as the income passes through the entities just as happens in partnership.
- Non-Profit Corporation:
These corporations are most commonly used by charity organizations. They are relieved from all taxes provided that the company operates without generating profits. It consumes all of its financial means on expansion and for future works.
Limited Liability Company (LLC)
Limited Liability Company (LLC) is a hybrid type of business that combines the characteristics of corporation and partnership in itself, also the sole proprietorship to some extent. It prevents the owners from their personal liability over business debts. Besides, it provides more flexibility and is easy to set up than a corporation.
- Business Sectors
You may consider the nature of business according to the market sector under which a business run.
- Government Sector
- Private Sector
- Public Sector
- International Sector
- Non-Profit Organizations
- Industrial Sector
- Military Sector
- Technology Sector
- Service Sector
Each sector signifies its nature by its name.
- Classification Of Business
The government classifies the businesses by the industry to which they belong. The classification helps them to collect the statistical data to analyse the role of an industry with respect to the business economy.
The commonly used business classification systems specifically in the United States categorize each company by their business activities.
- The North American Industry Classification System (NAICS)
SIC system is less regulated and mostly used by public sectors.
- Standard Industrial Classification (SIC) System
(NAICS) is more accurately used by public sectors as well as internationally by U.S., Canada, and Mexico.
- Nature of business types
At last, let’s check out the nature of a business with respect to the offering given by a company to its consumers.
A manufacturing business is a type of business in which many usable products are manufactured from various components or raw materials and then sold to earn profit. The manufacturer spends on the production, prepares a product, and supplies it to the market.
Manufacturing of fabrics from cotton and other raw materials. A few other examples are:
- Sugar manufacturing from sugarcane
- Automotive companies
A service is an act of offering intangible benefits to clients as a means to earn money. Service entails expertise in the respective field.
A physician gives his services to his patients and earns coins. Other examples are:
- Accounting services
- Freelance services
- Health care services
- Social assistance
- Educational services
- Law firms
Merchandising Business involves buying the products at wholesale rates and then selling them at retail prices. Merchandisers influence their consumers by granting special offers, discounted rates, and by using other various techniques.
Booksellers sell books by retaining their profit margins. Other merchandising business examples are:
- Florist selling flowers
- Grocery stores
- Stationery shops
- Clothing centers
A hybrid business is a type that involves all the above three in one. A hybrid businessman manufactures a product, provides services regarding the products. Further, he buys the product and then sells it out at a high price.
A cafe owner offers his services by receiving the orders(service), selling a self-made cold coffee(manufacturing), and retails icy Coca-Cola (merchandising).
Nature of business refers to the classification of business based on various characteristics. It may concern whether the business offers services or products, also the business organizations and business type according to distinctive perspectives. Overall, the Nature of business signifies all the roles and goals of a company or a business.