The nature of business refers to the overall purpose and operations of a company. It synthesizes what type of business it is and what problems it aims to solve.
Types of Business Structures
There are four main types of businesses:
- Sole proprietorships
- Partnerships
- Limited liability companies
- Corporations
Each has distinct characteristics and values shaped by industry, culture, and economics.
Business Identification and Operations
When starting a business, you’ll encounter business category codes. Each business must register with the state and local governments, which involves filing paperwork and paying fees. For example, even if a limited liability company doesn’t actively conduct business, it still must pay California’s $800 annual tax.
A business creates utility by making goods and services available when and where consumers need them. It deals in manufacturing, selling goods, and/or providing services. Understanding the nature and scope of a business helps set strategic priorities and monitor customer relationships.
Detailed Business Description
When describing your business, include:
- Legal entity
- Ownership structure
- Industry sector
- Products/services offered
- Production/sourcing details
- Processing methods
This covers the comprehensive nature of operations.
Classifying the Nature of Business
The nature of a business encompasses several aspects:
- Products and services sold
- The industry operated in
- The mission and purpose
- Other distinctive characteristics
To understand this, classify "nature" into categories:
- By product or service
- By organizational setup
- By what it sells
- By operations
- By other qualities
Business type indicates the market sector. Nature categories include:
- Government
- Military
- Technology
- Public
- Private
- Non-profit
- Service sectors
Subcategories may exist within these sectors. The industry classification considers nature, and businesses classify into government categories. The specific nature defines and separates businesses in an industry.