How Are Profits Determined?

A business is pretty simple to define. Simply put, it is any entity defined as a legal entity by law. A business can be either for-profit or non-profit entities that conduct primarily to meet a social cause or further an educational mission. There are many other types of businesses, such as partnerships, sole proprietorships, corporations, and the like. In this article, we will only discuss the business of selling real estate.

Real estate refers to land or other real property used to build or develop private, business properties. For example, you can construct a home, townhouse, apartment, or whatever, and call it your own. You can then engage in the business of selling the properties, either privately or through a real estate company. Businesses with sole proprietor status receive all of the profit, while corporations and partnerships make up the remainder of the pie.

Many businesses may only exist on paper, and there are some that exist solely online. These paper businesses may have a website, but without any tangible products to sell. Other businesses may provide services over the internet and may allow customers to purchase goods online through a website or through some sort of digital download.

A sole proprietor business, also known as a sole trader, is one where the business owner(s) performs all or most of the activity. Profits are only shared with the partners. This type of business can be a lot more challenging to set up because of the lack of goods to sell. Some of these businesses include auto glass installation, car repairs, and so forth. Although profit is not shared among partners, the profit is still generated through the sale of goods.

Non Profit Companies. A Non-Profit company has no profit. Many businesses have been set up to try to avoid sharing profit with other individuals working in the industry. Some Non-Profit businesses may offer services to individuals working in need of help. There may be a fee for such services. Other Non-Profit companies may donate part or all of their profit to a charity or cause they believe in.

Businesses Solely Employing People. A business can be run by an individual who is a sole employee. Individuals working at home can own a business this way. The benefit is that there are no costs associated with running a business this way. Some of these businesses are those that take online survey jobs and sell the products created by the individual who is working from home.

Limited Liability Company. Larger businesses may choose to use a limited liability company or LLC. This limits liability for the business and protects the owners of the business from being personally liable for the company debts. Also, limited liability companies are known to have a much lower tax rate than most other business activities. Because of these benefits, many businesses choose to form LLC’s instead of sole proprietorships or other types of business activity limitations.

Production and Distribution of Goods and Services. The production and distribution of goods and services involve both physical work and information processes. Human beings produce and direct the operations of production and distribution of goods and services. In order for a business firm to operate efficiently, all human activities must be accounted for in an accurate economic activity statement.

Production Processes and the Process of Marketing. All aspects of a modern business are touched upon in the production process and marketing process. Everything from the initial idea to the final product is accounted for in the accounting records of a business firm. Every purchase, sale and transaction that transpire throughout the entire course of business are included in the accounting of profits. The creation and development of new goods and services, expansion and improvements to existing goods and services are also accounted for in the profit making process. The development of new ideas and methods of operation, as well as the adaptation of certain technological innovations to improve production efficiency are all considered in the measurement of profits.

Business Interventions and Commercial Transactions. Purchasing and establishing new relationships with suppliers and other persons involved in the production and distribution of goods and services is another aspect that is accounted for in the accounting records of a firm. The acquisition and use of technology and the adoption of new techniques that enhance the production efficiency of goods and services are also factors that affect the profit making ability of a firm. Changes in business practices that prove to be beneficial to the production and distribution of goods and services account for a major part of profits in every business activity.

Distribution and Marketing. The process of gathering and distributing the product is an important factor that affects the profit of a firm. The profits of a firm can be increased if better means of communication are made available to the public. Communication can be made possible by different means such as trade fairs, advertising campaigns and media publicity. Changes in the production and distribution of goods and services that result in greater convenience to the consumer also increase the demand of that product and consequently enhance the profit margin of the firm.

Mitchel Campbell