Personal Finance- The Business World

Owning and/or managing a business can be highly profitable, but requires accepting the risk of failure with the accompanying heavy financial losses owing to any of a number of factors. A successful business follows such practices (not all-inclusive) as a clearly defined set of short- and long-term goals, effective marketing to attract the business's target market, responsible financial decision-making, differentiating one's product from that offered by one's competitors. Given the potential of accidents and/or lawsuits owing to numerous unanticipated incidents, purchasing of liability insurance is essential. The smallest businesses are typically sole proprietorships, owned by a single person and essentially inseparable from the owner. Sole owners can enjoy huge profits, but also assume full personal and financial liability for the company. In lieu of being the sole owner, small firms can be owned by 2 or more partners, sharing the profits but also the liability. Large companies, "corporations", are usually owned primarily by a large number of investors who own equity in the company in the form of shares of stock, each representing a tiny piece of the company. Corporations have an existence separate from that of the owners; thus, although the owners share the profits or losses sustained by the company as a whole, personal liability attached to the company does not apply to the owners directly. Thus, fraud within a company does not implicate each of the individual owners of that company.