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We see businesses everywhere around us – when you buy new clothes, order food or pay someone to run an errand for you!
Whether you’re a consumer or someone wanting to start a business, it’s always beneficial to understand the fundamentals of the business world and how it operates. So, what is a business?
In this article, we’ll break down what a business actually is, including structure, key roles, buying and selling processes, relevant legislation, regulatory bodies, contracts and the ongoing evolution towards eCommerce in 2025.
What Is A Business?
A business is an organisation that generates profit by selling goods or providing a service. The core elements that define an organisation are:
- Product: The item or service that the business offers.
- Market: Knowing your audience – the people you aim to serve or sell to – is critical.
- Vision: A clear purpose and robust business plan drive performance and growth.
- Finances: Effective management of capital, investments, and profits is essential for success.
Why Do People Start Businesses?
There are many reasons why individuals start businesses. Some have a unique product or service they believe will excel in the market, generating notable profits. Others embrace entrepreneurship for the freedom of working for themselves rather than being tied down to someone else’s rules.
Financial gain and security, along with the excitement of overcoming challenges and creating something from scratch, are strong motivators. In today’s diverse economy, many are also inspired by the prospect of making a positive impact on their communities.
Overall, starting a business in 2025 can be an incredibly rewarding experience that leads to meaningful connections and growth across various industries.
What Are Some Types Of Businesses?
Not every entrepreneur will have the same purpose, resources or requirements, meaning that business structure needs differ. Fortunately, there are several structures you can choose from – and it’s important to remember that you can change your business structure over time as your circumstances evolve. For instance, a business might begin as a sole trader and later incorporate as a company, depending on growth and changing risk profiles.
- Sole Trader: This is the simplest and often most cost-effective structure, where an individual runs the business alone. However, it carries a higher risk due to unlimited liability – a point we discuss further below.
- Partnership: When two or more people launch a business together, they form a partnership. The liabilities and responsibilities vary depending on the partnership agreement.
- Company: A company is a distinct legal entity. Whether private or public, the specific requirements depend on the chosen structure, with companies providing the benefit of limited liability.
Each structure has its own advantages and disadvantages, along with the necessary documentation. It’s crucial to assess your financial situation and understand the level of risk you’re prepared to shoulder before finalising your decision. For additional insights into selecting the right business model, you might find our guide on Business Structure extremely useful.
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Example For instance, a company is generally more complex and will often require additional key personnel to manage its operations. However, because a company is a separate legal person, any legal or financial challenges remain the company’s responsibility. If the company incurs debt, you may only need to liquidate company assets (such as the company car) while your personal assets, like your home, remain protected. Learn more about these protections in our Company Limited Liability article. |
Which Business Types Have Unlimited Liability?
Sole traders and partnerships typically carry unlimited liability. This means that, if the business runs into difficulties or owes money, the owner(s) are personally liable – potentially requiring the sale of personal assets to settle debts.
When choosing your business structure, consider the level of risk inherent in your transactions and decide if the potential returns justify that risk.
In contrast, companies enjoy limited liability, offering substantial protection for business owners since any debts incurred are those of the company and not of the individual. You can think of a company as its own legal person, capable of owning assets and accumulating liabilities.
Is A Business And Company The Same Thing?
Every company is a business, but not all businesses are companies. As detailed above, a company is just one type of business structure – and its hallmark is the benefit of limited liability. For a comprehensive look at the various structures available, check out our article on whether business structure matters.
How Do I Buy Or Sell A Business?
Buying or selling a business involves many considerations. Many individuals prefer to utilise business brokers for professional advice. Initially, you’ll need a proper valuation of your business and a decision on which elements – such as intellectual property, tangible assets or key contracts – are being sold. The same approach applies when purchasing a business.
It’s vital to determine the value of the business and whether you are acquiring it in full or only particular segments. For example, transferring ownership may involve instruments like an IP Assignment Deed or trade mark transfer. Our guidance on selling your business outlines additional steps to consider.
- Transferring ownership through an IP Assignment Deed
- Transferring a trade mark
- What will happen to existing staff
- Handover training
- Special tax requirements
- Transferring your lease
- Documents for transferring the registered business name
Before finalising a sale, it’s essential to work through a comprehensive checklist. Our expert lawyers can guide you through this process to ensure nothing is overlooked.
Franchises
If you’re considering buying a business, purchasing a franchise might be an appealing option. Franchising allows an established business to expand into new regions, enabling you to capitalise on proven business plans and intellectual property.
When you buy a franchise, you gain access to a brand, operational procedures and ongoing support in exchange for a franchise fee. A common example is opening a Donut King franchise in your local shopping centre. Ensure you are fully aware of your obligations by reviewing the terms set out in your Franchise Agreement.
For further insight on franchising, explore our resources which include topics such as Selling A Franchise and What To Do At The End Of A Franchise. These guides provide invaluable advice for both prospective and current franchisees.
What Are Some Of The Key Roles In A Company?
Directors
Directors manage and oversee the operations of a company. They hold significant authority and are entrusted with director duties that, if breached, can lead to severe consequences.
Employees
Employees work under contract to fulfil various roles within the company – from managers and receptionists to IT technicians. It’s important to differentiate them from contractors, as the legal obligations towards each group differ significantly. For detailed guidance on employment matters, our Employment Contracts page provides up-to-date information for 2025.
Shareholders
Shareholders are individuals or entities that own a portion of the company. While they hold specific rights and responsibilities, their role is typically more external compared to those involved in day-to-day operations.
Stakeholders
Stakeholders include anyone with an interest in the business, such as employees, customers, vendors and even community members. Their interests play an important role in shaping the company’s strategies and policies.
Are Charities, Not For Profits And Social Enterprises Considered Businesses?
Charities and not-for-profit organisations are generally not classified as businesses since their primary objective is not to generate economic profit. They rely on donations, grants and fundraising to sustain their activities.
In contrast, a social enterprise operates like a traditional business by selling goods or services for profit, but it also commits to a social, environmental, economic or political cause. For instance, a clothing store that employs individuals from disadvantaged backgrounds or a vegan café that donates a portion of its profits to animal welfare are clear examples of hybrid models in the modern market.
What Laws Regulate Businesses?
Companies Act 2006
Any business registered as a corporation in the UK is governed by the Companies Act 2006. This Act covers everything from the registration of the business and taxation matters to the duties of directors and shareholders. In 2025, adherence to the Act remains crucial in order to avoid penalties and ensure smooth operations.
Staying abreast of any amendments is essential; for current updates, our latest regulatory update offers valuable insights.
Consumer Rights Act 2015
The rights of consumers are firmly protected by the Consumer Rights Act 2015. This legislation is designed to shield consumers from misleading advertising and unfair contract terms, ensuring that they are treated fairly by businesses. Our article on Consumer Protection Laws in the UK explains these provisions in detail.
What Contracts Would I Need As A Business?
Having robust contracts in place is essential to safeguard your business and clearly define responsibilities and expectations. The specific contracts you need will depend on your business model; however, common examples include:
- Employment Contracts
- Shareholder Agreements
- Service Agreements
- Supply Agreements
- Non-Disclosure Agreements
Can I Do Business Overseas?
Expanding your business overseas is increasingly common in 2025. If you believe that your product or service holds the potential to succeed in international markets, moving into new territories can enhance both your profit margins and brand visibility.
It’s advisable to approach expansion gradually, starting with a few targeted regions rather than a full global rollout at once. Each market comes with its own set of regulations, ranging from data protection laws to tariffs and customs. For additional guidance on navigating these issues, our Drafting an Internationally Enforceable Contract guide offers helpful tips.
How Do I Start An Online Business?
Starting a business online – commonly known as eCommerce – has become increasingly popular due to its convenience, accessibility and relatively low overheads. However, even online businesses must adhere to the same foundational steps as traditional businesses, including registering a business name and paying the relevant taxes.
What Is E-Commerce?
E-commerce refers to the buying and selling of goods and services online. While the fundamental principles are consistent with traditional businesses, there are additional legal considerations when it comes to protecting data and ensuring secure transactions. In today’s digital landscape, it’s essential to have an updated Website Privacy Policy and a well-rehearsed Data Breach Response Plan.
Furthermore, consumers are increasingly cautious about online transactions. Using recognised and secure payment methods is critical for fostering trust, especially when selling internationally. For further reading on best practices, see our eCommerce Startup Guide.
Where Do I Get Funding?
To grow your business, attracting investors and raising capital is often necessary. In 2025, with many innovative funding options available, ensuring you have detailed business plans and robust financial safeguards is key. Strategies for capital raising include seeking venture capital, angel investment or even exploring crowdfunding opportunities.
For more comprehensive advice, take a look at our article on Raising Capital for Your Startup and our Business Set Up guides which have been updated for 2025.
Emerging Trends in 2025
As we progress further into 2025, the business landscape is evolving at a rapid pace. Notably, hybrid working models, enhanced digital security measures and the integration of artificial intelligence in business processes are now more prominent. Staying informed about these trends – for instance, by exploring our insights on Legal Side of ChatGPT – can provide you with a competitive edge in today’s market.
Key Takeaways
A business encompasses many facets, and the key takeaways are as follows:
- There are multiple types of business structures – your choice should reflect your financial circumstances and risk appetite.
- Charitable organisations follow different processes and structures compared to profit-oriented businesses.
- Professional legal advice on contracts is crucial to secure your business operations; check our Contract Review services for expert input.
- It’s vital to stay updated on relevant legislation and adhere to regulatory requirements.
- Online businesses and eCommerce operations must comply with both traditional regulations and additional digital requirements.
Next Steps
If you have any questions regarding business setup, funding options or legal compliance, our expert lawyers are here to help. We offer consultations on everything from reviewing contracts to advising on regulatory obligations tailored to your specific business activities in 2025.
To schedule a free, no-obligations chat, reach out to us at 1800 730 617 or [email protected]. You can also explore our comprehensive resources, including our Business Set Up Guides and industry-specific advice pages to help you navigate your entrepreneurial journey confidently.
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