A business is a legal entity in which a set of people work together under a common purpose. In a business, individuals work to either sell, produce or distribute products or services to customers. Others also purchase the goods and services produced by the business. In order to be legally recognized as a business, one must meet certain requirements that are established by the applicable government.
Most businesses are classified as either a corporation, partnership or sole proprietorship. A corporation is a separate legal entity from its owners who hold all of the stock and ownership in the corporation. Partnerships, which are often referred to as for-profit corporations, have one member holding the stock and shares with other members. Sole proprietor, or for-profit corporations, are run by the individual shareholder with no governing board.
Some businesses are incorporated directly by the government while others choose to incorporate through a commercial law firm. Most small businesses begin in either a sole proprietorship or partnership. Most start out as a sole proprietorship. That is, they are the sole member of the business and must take all actions on their own behalf without any assistance from anyone else. As their business begins to prosper and grows, some partnerships turn into corporations. This allows partners to share in the profits of the business and create a separate legal entity.