Top 1% Pays 37% of All U.S. Income Taxes

This is not specifically an accounting issue. But with recent attention to the 1% vs 99% media frenzy, it is worth examining some facts around who pays how much tax in the U.S.

Really interesting that the top 1/10 of 1% payc about 15% of all U.S. federal taxes. That is a total of 138,000 people.

This is an article from SmartPros.

The income earned by the top 1% of Americans has declined for the second year in a row while their average tax rate has increased, according to a new Tax Foundation study. The average federal tax rate for those reporting at least $343,927 in income has increased from 22.5% in 2007 to 24.0% in 2009, while the average income for the top 1% has declined from $1.4 million to $1 million over the same period.

The Tax Foundation's analysis is based on new data from the Internal Revenue Service on individual income taxes, reporting on calendar year 2009. The amount of individual income tax paid steeply declined by $166 billion, twice the decline from 2007 to 2008. Nationally, average effective income tax rates were at their lowest levels since the IRS began tracking them in 1986. The average tax rate for returns with a positive liability went from 12.2% in 2008 to 11.1% in 2009.

"During a time of economic downturn, we expect to see significant changes in both total income reported and the share of taxes paid by those with the highest incomes," said Logan. "Unlike middle-income wage-earners whose incomes and tax liabilities are fairly steady, high-income people tend to realize significant capital gains that fluctuate wildly with the economy, causing their income tax liabilities to fluctuate as well."

In 2009, the top 1% of tax returns earned 16.9% of adjusted gross income and paid 36.7% of all federal individual income taxes. In 2008 those figures were 20.0% and 38.0%, respectively. Each year from 2005 to 2007, the top 1 percent's constantly growing share of income earned and taxes paid set a record. The 2008 reversal of this trend continued in 2009.

The study also takes a look at the very highest earners, the top 0.1 percent of tax returns, which the IRS only began singling out in recent years. In 2009, those 138,000 tax returns accounted for nearly 7.8% of adjusted gross income earned (down from almost 10% in 2008), and they paid around 17% of the nation's federal individual income taxes (down from 18.5% percent in 2008).

"The very highest income group—the top one-tenth of one percent—actually has a lower average effective income tax rate than the rest of the top 1 percent of returns because these extremely high-income returns are more likely to have income from capital gains and dividends, which are typically taxed at lower rates," said Logan. "It's worth pointing out that in the case of capital gains and dividends, however, income derived from these sources has already been taxed once by the corporate income tax, which is not included in the current study, meaning the average effective tax rate numbers can be somewhat misleading."

CFOs Like New Goodwill Impairment Shortcut

CFOs seem likely to make heavy use of FASB’s new “qualitative” option for impairment testing.



Article by David M. Katz of CFO.com


Offered the chance to enable their company to avoid the currently complex calculations of goodwill-impairment testing, corporate finance executives will seize the opportunity in droves, a soon-to-be-released survey suggests.

Last summer Duff & Phelps and the Financial Executives Research Foundation, the parent organization of Financial Executives International, asked a group of CFOs, controllers, treasurers, and other corporate finance executives if their company would take advantage of a proposed Financial Accounting Standards Board shortcut. Under the FASB plan, companies could bypass the current two-step quantitative goodwill-testing process by making — and passing — a “qualitative” assessment of their impairments.

The two hundred FEI members who responded did so resoundingly in the affirmative. Sixty-nine percent of those working for private companies and 81% at public companies expect their employers to take advantage of the option for some or all of their reporting units.

They will now get their chance: on September 15, FASB stated a final version of its rule that companies will no longer be required to calculate the fair value of their reporting units if they judge, based on a qualitative assessment, that it’s more likely than not that their fair values are more than their book values. (Goodwill impairment occurs when the fair value of goodwill in a company’s reporting unit drops below the unit’s book value, also known as its “carrying amount.”)

The new option will be effective for annual and interim goodwill-impairment tests performed for fiscal years starting after December 15, and early adoption is permitted.

Previous FASB guidance required a company to test for goodwill impairment at least once a year using a two-step process. In step one, the entity had to figure out the fair value of a reporting unit and compare the fair value with the unit’s carrying amount. If the fair value were less than the carrying amount, then the company had to perform a second step to gauge the amount of the impairment loss, if there any.

In the new guidance, FASB says a company choosing to make a qualitative assessment must base it on “such events and circumstances” as macroeconomic conditions, industry and market conditions, raw materials and labor costs, and “overall financial performance such as negative or declining cash flows.”

Gary Roland, a managing director at Duff & Phelps, says he is surprised that a higher percentage of private-company finance executives didn’t say their company would take advantage of the shortcut. After all, FASB first came up with the idea in response to a push from private companies to provide them with a simpler, cheaper testing process.

Nevertheless, Roland had expected a strong positive response from companies across the board. “There’s no surprise that certain entities would want to take advantage of this because they weren’t happy with the fees,” he says.

The survey, however, recorded just the hopes of finance executives and is only a partial reflection of how many companies will actually take advantage of the shortcut, according to the valuation consultant. “It still could be a difficult proposition,” depending upon how narrowly companies passed impairment tests in prior years and how stringent auditors are in allowing companies to take the shortcut, he adds.

LAW5504 Comparative Law and Business

Essay Questions

Question 1: (2000 words)

Select a jurisdiction in accordance with the instructions given in paragraphs E5-E7 of the Course Book.  Your selected jurisdiction must not be on the black list unless it is specifically referred to on the white list.  Identify which legal tradition or traditions (civil law, common law, Islamic law, East Asian law) your selected jurisdiction embodies.  Justify your view.  If your selected jurisdiction also embodies other legal traditions discussed in Glenn (ie. chthonic [chapter 3], Talmudic [chapter 4] or Hindu [chapter 8]), you should also discuss them.  If your selected jurisdiction draws on legal traditions not discussed in Glenn (eg. Roman-Dutch law or Scandinavian law), you should discuss them as well.  To what extent is Regionalisation evident in your selected jurisdiction?  Justify your view.  To what extent are Diasporas evident in your selected jurisdiction?  Give examples where appropriate.

Question 2: (2000 words)

You are the Marketing Manager for an Information Technology (IT) corporation based in your selected jurisdiction, that has big plans to embrace the opportunities presented by Globalisation.  The IT corporation manufactures and retails IT products that attempt to compete with Apple Inc.  The IT corporation has developed an eMac, ePod, ePhone, and ePad etc.  The Board of the IT corporation has identified huge target markets in the United States, European Union, Asia and the Middle East.

The Board has asked you to prepare for the next Board meeting by being in a position to outline what issues need to be considered in deciding to what extent the IT corporation can expect to expand into one of the identified target markets by negotiating standard terms contracts that largely favour the IT corporation, to be used with wholesalers and retailers in various countries within those target markets.

Choose a country that embraces a legal tradition that differs from the legal tradition embraced by your selected jurisdiction.  Your chosen country must not be on the black list unless it is specifically referred to on the white list.

·         Clearly identify your chosen country in your answer.

Using the private international law of your selected jurisdiction, outline how you can ensure that:

1.      These contracts will be governed by the contract law of your selected jurisdiction; and

2.      Any legal disputes arising under the contract will (to the extent that is possible) be dealt with in only the courts of your selected jurisdiction.

In choosing a country, you must ensure that your selected jurisdiction is being compared with either the common law (if your selected jurisdiction does not embrace the common law tradition) or the civil law (if your selected jurisdiction does not embrace the civil law tradition), but not both.  If your selected jurisdiction does not embrace either the common law tradition or the civil law tradition, compare with only one of these.

Question 3: (500 words)

Does your selected jurisdiction recognise corporations that have (1) separate legal personality to its owners, and (2) limited liability for the owners of the corporation?  If so, how does it do this?  If not, what is the major form of business organisation recognised in your selected jurisdiction?

As you discuss this, compare briefly with either the common law tradition (if your selected jurisdiction does not embrace the common law tradition) or with the civil law tradition (if your selected jurisdiction does not embrace the civil law tradition), but not both.  If your selected jurisdiction does not embrace either the common law tradition or the civil law tradition, compare with only one of these.

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Big Shot Investors Say No to IFRS

By Emily Chasan of WSJ

When SEC Chairman Mary Schapiro said in June that investors aren’t clamoring for International Financial Reporting Standards, she may have been understating things… a bit. Now, some of the biggest U.S. investor groups are letting the SEC know in no uncertain terms that it should postpone its decision on IFRS and even stop the convergence process between U.S. GAAP and IFRS.

In comment letters to the SEC this week, some big investors and analyst groups had some scathing words about IFRS, claiming, among other things, that the International Accounting Standards Board isn’t independent enough from political interference to set accounting rules for the United States.

Capital Research and Management Co, which manages over $1 trillion, wrote that U.S. GAAP was “clearer, more effective and more advanced” than IFRS in providing the information it needs to make investments. CRMC Chairman Paul Haaga wrote in the letter:

While we support the idea of a consistent set of high quality accounting standards for companies worldwide, unfortunately we do not believe IASB has been effective in achieving this objective. Moreover, IASB’s ability to achieve this objective has been gravely diminished by political influence.

CRMC, which is the investment advisor to the American Funds mutual funds, said it doesn’t expect to benefit from the more comparable reporting IFRS is supposed to provide because the standard is applied so inconsistently around the world, and urged the SEC to retain U.S. GAAP. It also said the convergence process between U.S. accounting rule makers isn’t working and should be stopped.

Investors, analysts, and others, who use financial statement, are the purported beneficiaries of a switch to IFRS, as a single set of accounting rules should make it easier to compare publicly-traded companies around the world. Many CFOs are on record saying they would bear the cost of an IFRS switch if they think investors would benefit.

But even the CFA Institute, which represents over 100,000 portfolio managers, investment analysts and advisors throughout the world expressed doubts, saying it would be “premature” for the SEC to inject IFRS into the U.S. financial system. The CFA Institute said its continued support for IFRS is not unconditional, and that the International Accounting Standards Board needs to ensure its independence and more consistent application of its rules before U.S. companies are required to use them.

After abandoning an earlier plan that would have had U.S. companies using IFRS as soon as 2014, the SEC has said it would make a decision this year about whether companies in the U.S. should move toward the international standard, which is used in more than 100 other countries around the globe.

International Business Assignment Need Help

Group Assignment (20%)

Assignment Submission: 13 October 2011 (Thursday), 11:00am

Today’s rapidly changing economy requires increased quantities and quality of workforce. Countries, organisations, as well as individuals face many issues related to this challenge.

In your assignment, select an organisation, OR a country. Then, discuss, analyse and finally answer this question:

‘Import Workers or Export Jobs?’

The length of your analysis must be 4000 words (Excluding reference/ bibliography lists and Table of Contents)

It is compulsory for students to follow the assignment presentation and assignment paper Requirements lists and Assessment Schemes in writing the paper. If the presentation and paper does not adhere to the Requirements and Assessment Scheme, the lecturer and tutor reserves the right to deduct marks accordingly.

MKT5000 – Marketing management

Assignment 1
              Description                     Marks out of             Wtg (%)                Due date
 Marketing audit (modules 1–5)                     40.00                 40.00        

Length: 2000 words maximum
You are required to write one Marketing Audit Report (2000 words maximum – excluding
references). You should try to have a good list of references showing where you have found your
information. It is important to cite all work and websites you have visited. Do not use textbook
references. Websites, Magazines and other such periodicals must be referenced. See the links to
journals. If in doubt, check with a USQ reference librarian.

Audit company and report
Your first assignment is to conduct a marketing audit on one of the firm case outlines offered.
These can be found on USQ study desk. Information that will assist you to analyse this firm can
be found on the internet, you can look to firms local to you that are like these firms and use them
as a benchmark and you can use library and media searches. These are Small Medium Enterprises
so will be easier to evaluate for you. You must conduct a marketing audit which includes an
environmental scan, PEST analysis, customer analysis, and competitor analysis and stakeholder
analysis.You must clearly analyse the internal and external factors of this firm and offer a SWOT
to support this. Further materials will be available to support these cases on the study desk. The
modules 1-5 will support these activities and the discussion activities we have completed will also
support these activities. Once you have completed all of the analytical sections, you must develop
a set of important issues that are the outcome of the SWOT, this is called a gap analysis or a TOWS
analysis.
Your assignment 1 will be completed at this point. An example of a TOWS is offered.
                                                                                   © University of Southern Queensland

MBA level on Information and Knowledge Management

Following are my assignment question for MBA level on Information and Knowledge Management:

 Assignment                                                                                                                           

It is generally agreed among scholars and practitioners that most of the knowledge that

resides within organisations is tacit in nature. Tacit knowledge refers to that knowledge

that cannot be articulated and stored independently and normally remains part of the

individual’s cognitive thought. This knowledge remains an important factor for achieving

competitive advantage in today’s knowledge based economies. Thus, it is vital for

organisations to ensure such knowledge is captured and managed effectively and this can

be achieved through effective knowledge sharing practices. Knowledge sharing is noted

as one of the most important knowledge management activities. However, there remain

many barriers to knowledge sharing as people are reluctant to share knowledge.

As the newly appointed Knowledge Management (KM) director, your company has given

you the task of turning the firm into a knowledge based organisation. You were given the

task to look into the following:

1. To identify the barriers to knowledge sharing in the firm.

2. To develop a knowledge sharing framework.

3. To suggest effective knowledge sharing practices for the firm.

You are required to write a report to the management addressing the issues above. The

report should be about 3500 words.

 

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hide details 12:50 PM (2 hours ago)

Hi Justin,

Thanks.I can read it. Give me some time read thru 1st. If there have any changes I will let you know.

Enclosed herewith another assisgnment . Delivery date is 11/10/2011 . Kindly send a quotation.

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Top Ten Most Influential Accountants

A Top Ten list from a list of 100 of the most influential accountants in the U.S., as compiled by Accounting Today.


1. Barry Melancon, President and CEO, American Institute of CPAs
2. Mary Schapiro, Chair, Securities and Exchange Commission
3. Leslie Seidman, Chair, Financial Accounting Standards Board
4. Douglas Shulman, Commissioner, Internal Revenue Service
5. James Doty, Chair, Public Company Accounting Oversight Board
6. James Kroeker, Chief accountant, Securities and Exchange Commission
7. James Metzler, Vice President of small firm interests, American Institute of CPAs
8. Hans Hoogervorst, Chair, International Accounting Standards Board
9. Mark Koziel, Vice President of firm services & global alliances, American Institute of CPAs
10. Gary Boomer, CEO, Boomer Consulting
See if you made the list of 100 by looking here.

Fix for IFRS XBRL Taxonomy Exposed

Both the U.S. GAAP and IFRS XBRL taxonomies have been revised and exposed for comment.

For those not familiar with XBRL, it is an open-source HTML-like language for tagging financial statements. Proponents claim that XBRL makes it easier for investors and analysts to compare financial results across companies and industries. XBRL is now mandated by the SEC for public companies to use in their financial filings. XBRL tags let users of financial statements electronically search for, assemble, and process data so the information can be accessed and analyzed by investors, analysts, journalists and regulators.

The 2012 U.S. GAAP Financial Reporting Taxonomy is expected to be finalized and published in early 2012. The proposed 2012 U.S. GAAP taxonomy and instructions on how to submit comments are available on FASB’s XBRL page.

As for the IFRS taxonomy, the IFRS Foundation has revised it taxonomy in response to regulators and preparers who wanted more extensions (additional sub-accounts) to the full IFRS XBRL taxonomy.

The IFRS XBRL taxonomy is used to help those filing IFRS financial statements electronically to tag the information with identification tags, also known as “concepts.” Currently, the IFRS taxonomy includes all of the core concepts included in IFRS as issued by the IASB. However, preparers often need to provide more detailed financial information than is reflected by the core IFRS concepts.

To ensure that those creating and using electronic filings do not need to create their own extensions to the IFRS taxonomy, the IFRS Foundation has created an “extension taxonomy” by analyzing and drawing from common practice. For instance, although IFRS requires the disclosure of an analysis of expenses, IFRS does not include a prescriptive listing of all of the possible categories of expenses. The common-practice taxonomy includes concepts for the most commonly used types of expenses, such as “sales and marketing.”

The interim taxonomy released on Thursday completes the first part of a project to address this issue, by providing about 350 extensions for the most common concepts used in the financial statements.

The common practice concepts are in line with IFRS requirements and will help to alleviate the burden on preparers and to increase the comparability between financial statements in accordance with IFRS that are electronically submitted.

CFOs Exit Restating Companies, Study Finds

But they overwhelmingly tend to resign rather than get fired, companies report.
Good article by David M. Katz, of CFO.com

Restatements of financial reports usually convey bad news about a company to the stock market, and CFOs, as chief stewards of financial reports, tend to like nothing less than bearing such tidings. In fact, when companies restate, their finance chiefs show a pronounced tendency to leave, new research confirms. Usually, however, it's their own decision to walk — or at least that's what the companies are reporting.

From 2005 to 2009, companies in general had a 14.88% to 19.47% chance of having a CFO departure in a given year, according to Audit Analytics, a data-research firm. But the situation changed dramatically for companies that filed a restatement. In such cases, the probability of a finance chief leaving in the period beginning three months before and ending nine months after a restatement rose to a range of 19.06% to 28.99%.

The finance chiefs mostly resigned, rather than receiving pink slips. Overall, the companies studied had a resignation rate of between 14.45% and 18.57%, while the restated companies experienced a rate from 18.06% to 27.68%. (The researchers looked at a total of 48,200 10-K filers that also filed an audit opinion over the five-year period.)

Companies rarely report that they have dismissed a CFO regardless of the reason, according to the Audit Analytics report, CFO and Auditor Departures Occurring Near the Issuance of a Restatement. Overall, companies experienced a dismissal rate ranging from 0.40% to 0.99% over the five-year period. If the companies filed a restatement, the chance of a finance chief's dismissal jumped to between 1.00% and 1.30% — a very large difference, but involving very low numbers.

"What a CFO can take out of this [study] is that the chance of getting fired and having it shot out as an 8-K disclosure really doesn't increase near the occurrence of a restatement," says Donald Whalen, the firm's director of research.



But are all those finance chiefs actually leaving on their own? While Whalen says that such information generally can't be gleaned from financial statements, he grants that CFOs threatened with dismissal might negotiate with their employer to have the move reported as a resignation. The "You can't fire me, I quit" scenario may also exist in some cases.

A company, however, has an interest in not reporting turmoil in its senior ranks. To report a resignation rather than a dismissal is usually preferable, says Whalen, because "at least it shows a better relationship than companies that come right out and say, 'Hey, we kicked this guy out.'"

CFOs might also want to take pains to avoid certain types of restatements rather than others. Restatements involving revenue recognition tend to have an especially malign effect on share prices, while those involving corporate cash flow rarely make a dent, according to Whalen.

As is the case with CFOs, companies and their auditors tend to sever relations more frequently during a restatement, according to the Audit Analytics report. For all the companies studied, the departure rate varied from 10.19% to 15.69% during the five-year period. But among those filing restatements, the departure rate rose to between 20.79% and 25.75%.

Impairment Bucket List

No, it’s not a list of cool impairments that an accountant might calculate in his lifetime, if he or she had the time and luck.

Accounting standard-setters are working on a new method of categorizing impaired financial instruments.

The recent credit crisis has advanced a need for revision of the current model as large financial institutions did not agree with existing standards. Large banks, for example, claim that the existing standards result in a “pro-cyclical” result. That means that when times were good, they accounting rules made things look better, faster. And when times were bad, things looked bas faster. Or went to hell faster, as we saw in 2009/03. The rules also impact other sectors.

Credit Crisis Effects
In 2008, banks were following a system of incurred loss reporting, meaning assets were marked down, or impaired, only once their value had demonstrably fallen. Critics said this caused catastrophic shortcomings in financial early warning systems, meaning banks were unable to build up reserves for expected losses and were woefully unprepared when asset values suddenly went into freefall.

The IASB has developed a more forward-looking set of rules for calculating impairment.

“Three-Bucket Solution”

One approach, and the major one being advocated now, is called the three-bucket approach.

One pre-IFRS problem was earnings management, when banks would set aside provisions with little justification, only to release them in lean years to plump up earnings. Critics said this made it hard for investors to get a handle on banks' true financial positions; from these concerns was born incurred loss reporting.

After the credit crisis, the accounting problem was how to permit the judgment essential for expected loss provisioning without paving the way for a potential return to earnings management.

The three-bucket approach aims to break down assets according to impairments, keeping a tighter rein on provisioning and giving analysts a clearer picture of financial health.

Into bucket one goes 'healthy' assets, those for which banks expect a reasonable return and need only make minimal provisions. Bucket two is reserved for assets with some level of impairment, but which are not completely useless, while bucket three is for assets that are undeniably 'bad'.

Throughout its life, the asset can move between buckets according to macro- and micro-economic triggers, hopefully allowing banks to make exactly the right provision at exactly the right time.

An example might be a bundle of mortgages. The bank grants the mortgages, and works out on the basis of historical data that it is likely to take an 80% return on them. It therefore makes provision for the 20% loss and the mortgage bundle sits in bucket one until a trigger makes re-evaluation necessary.

This trigger could be a macro-economic event such as falling oil prices, a contracting economy or rising unemployment. From this, the bank might deduce that a greater proportion of mortgage holders will struggle to pay and shift the asset bundle into bucket two, requiring higher provisions to be made.

For the mortgages to jump to bucket three, they must be demonstrably impaired, for example when the inhabitants of a town hit by unemployment begin defaulting on their mortgages. This is essentially an incurred loss model and would result in very high or 100% provisioning for the de-valued assets.

Unfinished business
Like all theoretical models, there is much uncertainty to be hammered out. What constitutes a bucket-moving trigger? When an asset is impaired, who decides whether the impairment is expected – therefore already provided for – or unexpected, meaning more cash should be set aside? How will auditors examine such a complicated model and will it really prevent earnings management if banks are determined to do it?

A number of question exist, and will need to be ironed out prior to implementation.

Business

For other uses, see Business (disambiguation).

This article has multiple issues. Please help improve it or discuss these issues on the talk page. It needs additional references or sources for verification. Tagged since September 2008. It may require general cleanup to meet Wikipedia's quality standards. Tagged since February 2009.

e

A business (company, enterprise or firm) is a legally recognized organization designed to provide goods or services, or both, to consumers, businesses and governmental entities.^[1] Businesses are predominant in capitalist economies. Most businesses are privately owned. A business is typically formed to earn profit that will increase the wealth of its owners and grow the business itself. The owners and operators of a business have as one of their main objectives the receipt or generation of a financial return in exchange for work and acceptance of risk. Notable exceptions include cooperative enterprises and state-owned enterprises. Businesses can also be formed not-for-profit or be state-owned.
The etymology of "business" relates to the state of being busy either as an individual or society as a whole, doing commercially viable and profitable work. The term "business" has at least three usages, depending on the scope — the singular usage (above) to mean a particular company or corporation, the generalized usage to refer to a particular market sector, such as "the music business" and compound forms such as agribusiness, or the broadest meaning to include all activity by the community of suppliers of goods and services. However, the exact definition of business, like much else in the philosophy of business, is a matter of debate and complexity of meanings.

Contents [hide] 1 Basic forms of ownership 2 Classifications 3 Management 3.1 Reforming State Enterprises 4 Government regulation 4.1 Organizing 4.2 Commercial law 4.3 Capital 4.4 Intellectual property 4.5 Exit plans 5 See also 6 Notes and references 7 External links

[edit] Basic forms of ownership

Although forms of business ownership vary by jurisdiction, there are several common forms:

• Sole proprietorship: A sole proprietorship is a business owned by one person. The owner may operate on his or her own or may employ others. The owner of the business has personal liability of the debts incurred by the business.


• Partnership: A partnership is a form of business in which two or more people operate for the common goal which is often making profit. In most forms of partnerships, each partner has personal liability of the debts incurred by the business. There are three typical classifications of partnerships: general partnerships, limited partnerships, and limited liability partnerships.


• Corporation: A corporation is either a limited or unlimited liability entity that has a separate legal personality from its members. A corporation can be organized for-profit or not-for-profit. A corporation is owned by multiple shareholders and is overseen by a board of directors, which hires the business's managerial staff. In addition to privately owned corporate models, there are state-owned corporate models.


• Cooperative: Often referred to as a "co-op", a cooperative is a limited liability entity that can organize for-profit or not-for-profit. A cooperative differs from a corporation in that it has members, as opposed to shareholders, who share decision-making authority. Cooperatives are typically classified as either consumer cooperatives or worker cooperatives. Cooperatives are fundamental to the ideology of economic democracy.

For a country-by-country listing of legally recognized business forms, see Types of business entity.

[edit] Classifications

Wall Street, Manhattan is the location of the New York Stock Exchange and is often used as a symbol for the world of business.

There are many types of businesses, and because of this, businesses are classified in many ways. One of the most common focuses on the primary profit-generating activities of a business:

• Agriculture and mining businesses are concerned with the production of raw material, such as plants or minerals.


• Financial businesses include banks and other companies that generate profit through investment and management of capital.


• Information businesses generate profits primarily from the resale of intellectual property and include movie studios, publishers and packaged software companies.


• Manufacturers produce products, from raw materials or component parts, which they then sell at a profit. Companies that make physical goods, such as cars or pipes, are considered manufacturers.


• Real estate businesses generate profit from the selling, renting, and development of properties, homes, and buildings.


• Retailers and Distributors act as middle-men in getting goods produced by manufacturers to the intended consumer, generating a profit as a result of providing sales or distribution services. Most consumer-oriented stores and catalogue companies are distributors or retailers. See also: Franchising


• Service businesses offer intangible goods or services and typically generate a profit by charging for labor or other services provided to government, other businesses, or consumers. Organizations ranging from house decorators to consulting firms, restaurants, and even entertainers are types of service businesses.


• Transportation businesses deliver goods and individuals from location to location, generating a profit on the transportation costs


• Utilities produce public services, such as heat, electricity, or sewage treatment, and are usually government chartered.

There are many other divisions and subdivisions of businesses. The authoritative list of business types for North America is generally considered to be the North American Industry Classification System, or NAICS. The equivalent European Union list is the NACE.

[edit] Management

The efficient and effective operation of a business, and study of this subject, is called management. The main branches of management are financial management, marketing management, human resource management, strategic management, production management, service management and information technology management.

[edit] Reforming State Enterprises

In recent decades, assets and enterprises that were run by various states have been modeled after business enterprises. In 2003, the People's Republic of China reformed 80% of its state-owned enterprises and modeled them on a company-type management system.^[2] Many state institutions and enterprises in China and Russia have been transformed into joint-stock companies, with part of their shares being listed on public stock markets.

[edit] Government regulation

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Most legal jurisdictions specify the forms of ownership that a business can take, creating a body of commercial law for each type.

[edit] Organizing

The major factors affecting how a business is organized are usually:

The Bank of England in Threadneedle Street, London, England.

• The size and scope of the business, and its anticipated management and ownership. Generally a smaller business is more flexible, while larger businesses, or those with wider ownership or more formal structures, will usually tend to be organized as partnerships or (more commonly) corporations. In addition a business that wishes to raise money on a stock market or to be owned by a wide range of people will often be required to adopt a specific legal form to do so.


• The sector and country. Private profit making businesses are different from government owned bodies. In some countries, certain businesses are legally obliged to be organized in certain ways.


• Limited liability. Corporations, limited liability partnerships, and other specific types of business organizations protect their owners or shareholders from business failure by doing business under a separate legal entity with certain legal protections. In contrast, unincorporated businesses or persons working on their own are usually not so protected.


• Tax advantages. Different structures are treated differently in tax law, and may have advantages for this reason.


• Disclosure and compliance requirements. Different business structures may be required to make more or less information public (or reported to relevant authorities), and may be bound to comply with different rules and regulations.

Many businesses are operated through a separate entity such as a corporation or a partnership (either formed with or without limited liability). Most legal jurisdictions allow people to organize such an entity by filing certain charter documents with the relevant Secretary of State or equivalent and complying with certain other ongoing obligations. The relationships and legal rights of shareholders, limited partners, or members are governed partly by the charter documents and partly by the law of the jurisdiction where the entity is organized. Generally speaking, shareholders in a corporation, limited partners in a limited partnership, and members in a limited liability company are shielded from personal liability for the debts and obligations of the entity, which is legally treated as a separate "person." This means that unless there is misconduct, the owner's own possessions are strongly protected in law, if the business does not succeed.
Where two or more individuals own a business together but have failed to organize a more specialized form of vehicle, they will be treated as a general partnership. The terms of a partnership are partly governed by a partnership agreement if one is created, and partly by the law of the jurisdiction where the partnership is located. No paperwork or filing is necessary to create a partnership, and without an agreement, the relationships and legal rights of the partners will be entirely governed by the law of the jurisdiction where the partnership is located.
A single person who owns and runs a business is commonly known as a sole proprietor, whether he or she owns it directly or through a formally organized entity.
A few relevant factors to consider in deciding how to operate a business include:

1. General partners in a partnership (other than a limited liability partnership), plus anyone who personally owns and operates a business without creating a separate legal entity, are personally liable for the debts and obligations of the business.


2. Generally, corporations are required to pay tax just like "real" people. In some tax systems, this can give rise to so-called double taxation, because first the corporation pays tax on the profit, and then when the corporation distributes its profits to its owners, individuals have to include dividends in their income when they complete their personal tax returns, at which point a second layer of income tax is imposed.


3. In most countries, there are laws which treat small corporations differently than large ones. They may be exempt from certain legal filing requirements or labor laws, have simplified procedures in specialized areas, and have simplified, advantageous, or slightly different tax treatment.


4. To "go public" (sometimes called IPO) -- which basically means to allow a part of the business to be owned by a wider range of investors or the public in general—you must organize a separate entity, which is usually required to comply with a tighter set of laws and procedures. Most public entities are corporations that have sold shares, but increasingly there are also public LLCs that sell units (sometimes also called shares), and other more exotic entities as well (for example, REITs in the USA, Unit Trusts in the UK). However, you cannot take a general partnership "public."

[edit] Commercial law

Offices in the Los Angeles Downtown Financial District

Most commercial transactions are governed by a very detailed and well-established body of rules that have evolved over a very long period of time, it being the case that governing trade and commerce was a strong driving force in the creation of law and courts in Western civilization.
As for other laws that regulate or impact businesses, in many countries it is all but impossible to chronicle them all in a single reference source. There are laws governing treatment of labor and generally relations with employees, safety and protection issues (Health and Safety), anti-discrimination laws (age, gender, disabilities, race, and in some jurisdictions, sexual orientation), minimum wage laws, union laws, workers compensation laws, and annual vacation or working hours time.
In some specialized businesses, there may also be licenses required, either due to special laws that govern entry into certain trades, occupations or professions, which may require special education, or by local governments. Professions that require special licenses range from law and medicine to flying airplanes to selling liquor to radio broadcasting to selling investment securities to selling used cars to roofing. Local jurisdictions may also require special licenses and taxes just to operate a business without regard to the type of business involved.
Some businesses are subject to ongoing special regulation. These industries include, for example, public utilities, investment securities, banking, insurance, broadcasting, aviation, and health care providers. Environmental regulations are also very complex and can impact many kinds of businesses in unexpected ways.

[edit] Capital

Mexican Stock Exchange in Paseo de la Reforma, Mexico City

When businesses need to raise money (called 'capital'), more laws come into play. A highly complex set of laws and regulations govern the offer and sale of investment securities (the means of raising money) in most Western countries. These regulations can require disclosure of a lot of specific financial and other information about the business and give buyers certain remedies. Because "securities" is a very broad term, most investment transactions will be potentially subject to these laws, unless a special exemption is available.
Capital may be raised through private means, by public offer (IPO) on a stock exchange, or in many other ways. Major stock exchanges include the Shanghai Stock Exchange, Singapore Exchange, Hong Kong Stock Exchange, New York Stock Exchange and Nasdaq (USA), the London Stock Exchange (UK), the Tokyo Stock Exchange (Japan), and so on. Most countries with capital markets have at least one.
Business that have gone "public" are subject to extremely detailed and complicated regulation about their internal governance (such as how executive officers' compensation is determined) and when and how information is disclosed to the public and their shareholders. In the United States, these regulations are primarily implemented and enforced by the United States Securities and Exchange Commission (SEC). Other Western nations have comparable regulatory bodies. The regulations are implemented and enforced by the China Securities Regulation Commission (CSRC), in China. In Singapore, the regulation authority is Monetary Authority of Singapore (MAS), and in Hong Kong, it is Securities and Futures Commission (SFC).
As noted at the beginning, it is impossible to enumerate all of the types of laws and regulations that impact on business today. In fact, these laws have become so numerous and complex, that no business lawyer can learn them all, forcing increasing specialization among corporate attorneys. It is not unheard of for teams of 5 to 10 attorneys to be required to handle certain kinds of corporate transactions, due to the sprawling nature of modern regulation. Commercial law spans general corporate law, employment and labor law, healthcare law, securities law, M&A law (who specialize in acquisitions), tax law, ERISA law (ERISA in the United States governs employee benefit plans), food and drug regulatory law, intellectual property law (specializing in copyrights, patents, trademarks and such), telecommunications law, and more.
In Thailand, for example, it is necessary to register a particular amount of capital for each employee, and pay a fee to the government for the amount of capital registered. There is no legal requirement to prove that this capital actually exists, the only requirement is to pay the fee. Overall, processes like this are detrimental to the development and GDP of a country, but often exist in "feudal" developing countries.

[edit] Intellectual property

Businesses often have important "intellectual property" that needs protection from competitors for the company to stay profitable. This could require patents or copyrights or preservation of trade secrets. Most businesses have names, logos and similar branding techniques that could benefit from trademarking. Patents and copyrights in the United States are largely governed by federal law, while trade secrets and trademarking are mostly a matter of state law. Because of the nature of intellectual property, a business needs protection in every jurisdiction in which they are concerned about competitors. Many countries are signatories to international treaties concerning intellectual property, and thus companies registered in these countries are subject to national laws bound by these treaties.

[edit] Exit plans

Businesses can be bought and sold. Business owners often refer to their plan of disposing of the business as an "exit plan." Common exit plans include IPOs, MBOs and mergers with other businesses. Businesses are rarely liquidated, as it is often very unprofitable to do so.

[edit] See also

Main article: Outline of business

Accounting List of accounting topics Advertising Banking Big business Business acumen Business broker Business ethics List of business ethics, political economy, and philosophy of business topics Social responsibility Business hours Business mediator Business schools Business trip Capitalism Change management analyst Commerce List of business law topics Company Corporate law Corporation Cooperative Cost overrun Economics Economic democracy Financial economics List of economics topics Electronic commerce E-business Entrepreneurship Finance List of finance topics

Franchising Government ownership Human Resources List of human resource management topics Industry Insurance Intellectual property Interim Management International trade List of international trade topics Investment Limited liability List of oldest companies Management List of management topics Management information systems List of information technology management topics Manufacturing List of production topics Marketing List of marketing topics Money Organizational studies Partnership Real Estate List of real estate topics Renewable Energy Revenue shortfall Small business Sole proprietorship Strategic Management Strategic Planning Types of business entity

Business and economics portal Book:Business Books are collections of articles that can be downloaded or ordered in print.

[edit] Notes and references

1. ^ Sullivan, arthur; Steven M. Sheffrin (2003). Economics: Principles in action. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. p. 29. ISBN 0-13-063085-3. http://www.pearsonschool.com/index.cfm?locator=PSZ3R9&PMDbSiteId=2781&PMDbSolutionId=6724&PMDbCategoryId=&PMDbProgramId=12881&level=4.


2. ^ People.com