When you started a business, your main goal mostly is to achieve profits as many as you can collect. Right? But, nowadays, with the advancement of humanity and caring for each other, many people and organizations start a business without aiming high profits. These businesses are called nonprofit business.
What is Nonprofit Business?
Some academic studies do not like the term “nonprofit business” because ultimately, no businesses are started without aiming profits in the first place. Most academic readings use the term “nonprofit organization” instead of “nonprofit business” since they categorized nonprofit organization as a non-business entity. However, for the rest of this article, I prefer to use the term “nonprofit business”. Nonprofit business is started without aiming high profits. They may still aim for cash inflows or assets increase, while they still also have some financial activities going. However, these financial capabilities are organized not to achieve profits that maximize the value of the business as well as its owners. It mostly prefers to circulate these financial capabilities to maximize the value of its surroundings or other people. This organization or this business usually creates some social activity that brings high benefits to people in general.
Management of Nonprofit Business
Remember, it does not mean that nonprofit businesses do not take any cash inflows or receive any assets increase at all. They use their financial assets mostly to make benefit for all people. Sometimes they also create profits for themselves but they do not call it “profit”; they prefer to call it “budget surplus” or such, so they will always use this surplus for next social projects in the future. There are many examples of nonprofit businesses around us. Charity, for example, is the simplest form of nonprofit business. Thus, charities may be categorized as a business entity for its financial inflow and outflow.
Depending on its ownership, there are many types of business entities. When you start a small business, chances are you are going to start it as a sole proprietary business.
What is Sole Proprietary Business?
Basically, a sole proprietary business is a business that is owned and operated by a single person. There is no other person involved in the business, just one person and one person only. When you start a small, home business, chances are you will be managing the business by yourself. That is what is called as a sole proprietary business. An exception of sole proprietary business is when a business is owned and operated by a married couple. In this case, this married couple is considered as a single person, because there is no separation of task between the husband and the wife. If you and one of your brothers started a business, it may be considered as a sole proprietary business too, as long as there is no certain distinguishment and separation of task between you and your brother.
How Does A Sole Proprietary Business Differ From A Partnership?
A sole proprietary business is mostly characterized by how many people are involved in the business. The second characteristics of a sole proprietary business is there is no separation of task between the function of ownership and management. If you are the only person involved in your business, you may not be able to clearly distinguish the way you act as an owner or the manager of the business. This is what apparently differs a sole proprietary business from a partnership. A business is called a partnership if both owned by more than a person and each of these persons have a separate function. Perhaps some are tasked as a manager, while the others are a passive partner, meaning that they are only contributing some assets without actually managing it.