Launching your own business can be an exciting experience. You'll have a chance to create meaningful connections, build a loyal clientele and create your own brand. Depending on your industry and goals, you could change people's lives and make a difference in your community. Before getting started, decide whether you want to form a nonprofit or a for-profit entity. The latter is also known as a commercial organization.
What Is a Business Organization?
There are different types of legal entities, and each has distinctive traits. If your goal is to make a profit, it's necessary to form a business entity so you can provide goods or services to customers in exchange for money. A nonprofit organization, by contrast, aims to raise awareness for a specific cause. Its funds are used to support that particular cause or viewpoint.
Business entities can be divided into several categories based on their size, legal structure and other criteria. Partnerships, for example, are different from sole proprietorships or corporations. A traditional organization definition is a group of people who work together in a structured way to pursue collective goals. Basically, it's a generic term. This category can include for-profit and non-profit entities as well as political parties, federations, cooperatives and more.
The primary goal of a commercial organization is to generate profit. This type of business entity comprises one or more people or companies in the public or private sector that work together and share the same mission and goals. The profit is reinvested back into the company or distributed to shareholders and employees.
If the commercial business definition still seems unclear, think of the brands you love or interact with on a daily basis. Pepsi, Coca-Cola, Walmart, Target, McDonald’s, Dell, HP and Google are all commercial organizations. Their goal is to develop and sell products or services that provide value to the end customer and generate revenue.
All companies that fall under this category engage in commercial activities. These may include, but are not limited to:
- Retail activities.
- Franchise operations.
- Advertising and promotion.
- Banking and finance.
- Foreign trade.
Any particular transaction or act that is of a commercial character and aims to generate profit can be considered a commercial activity. For example, if you provide business consulting or web design services in exchange for money, you conduct commercial transactions.
Types of Commercial Organization
A commercial business organization can have public or government ownership, private individual ownership or a mix of both. It can be further broken down into several categories, such as limited-liability companies, corporations, partnerships and others.
The meaning of a commercial organization is broad and can include everything from small businesses to private and public limited companies. Charities, however, are not commercial, so they don't fall under this category.
Limited liability entities, for instance, are commercial organizations that limit owners' liability to their investment in the business. This category includes corporations and limited liability companies or LLCs.
Unlimited liability organizations, such as sole proprietorships and general partnerships, hold the business owner liable personally for debt, wrongful acts, negligence and so on. In a partnership, for example, each partner has total and unlimited personal liability.
What Is Commercial Work?
When researching the different types of commercial organizations, you may see the term "commercial work" mentioned in various documents and legal papers. This term refers to any kind of work or activity that is done for profit.
Let's say you start a website that discusses the different types of insurance products, such as car insurance, life insurance, health coverage and so on. You describe how they work, how much they cost, how to choose an insurance plan and more. As long as you don't monetize your website, you don't do commercial work or engage in commercial activities.
However, if you start to promote or sell insurance products or other goods or services on your site for profit, your work becomes commercial. In this case, it's important that you form a company and register for tax purposes to comply with the law.
Here is another example: A photographer who shares his work online or in magazines without being paid for it does not engage in commercial activities. Perhaps he's trying to make a name for himself or see how others feel about his work. One who shares his photos on stock photography websites or sells them to magazines or bloggers for profit is performing commercial work. His photos generate income and represent a source of income.
A non-profit organization, on the other hand, doesn't engage in commercial activities when selling crafts or other goods. The money earned from its activities is used to cover its expenses and support its cause. Unlike commercial organizations, charities don't generate profits for their founders or shareholders.
Business Organization Purposes and Goals
Besides making a profit, business organizations can have a multitude of purposes, from inspiring people to developing products that could change the world. These goals must align with their overall business philosophy and culture. They encompass the company's mission, vision and values. Successful entrepreneurs can combine profit and purpose.
Numerous studies indicate that organizations with a purpose beyond profit tend to generate more revenue. These companies often prioritize customer satisfaction because they know that happy customers ensure long-term success. Furthermore, they have a stronger culture and higher employee engagement rates.
According to a survey, purpose-driven businesses grow at a faster rate and report greater employee productivity. More than 82 percent of respondents said that having a purpose drives innovation. About 88 percent believe that it guides effective decision-making. A staggering 90 percent of those employed by purpose-driven organizations report feeling engaged.
A common vision unifies employees and gives them something to fight for. Employees working for a cancer research institute, for example, know that the organization’s purpose is to save lives and make the world a better place. Therefore, they're driven by a goal that inspires them and goes beyond financial gain. They are more motivated to give their best at work and remain loyal to that company.
Examples of Business Goals
Each business entity has different goals. A public organization, for instance, may strive to create new jobs, protect citizens and business and ensure that everyone has access to essential goods and services. It may also try to maintain environmental standards and contribute to economic growth.
As a business owner, you can also focus on improving customer experience, developing public and social responsibility or optimizing productivity within your organization. Some companies prioritize employee satisfaction and come up with new, innovative ways to motivate workers and help them reach their full potential. Others commit themselves to social causes and give a part of their profits to charity.
While the ultimate goal of a commercial organization is to make money, this isn't its sole purpose. Before starting a business, ask yourself: Why is this work important? How does it contribute to society? Does it allow for future growth and opportunities? Does it inspire action?
A company that sells dietary supplements or gym equipment, for example, will strive to promote health and well-being. One that offers entertainment services will try to make people happy and help them disconnect from their daily problems. An organization specialized in software development may try to help other businesses succeed, help customers learn new skills or create new technologies.
Organizations cannot thrive without purpose. No matter how big or small your business, make sure you have a clear goal in mind and a plan to bring your vision to life.
- Business Dictionary: Organization
- Entrepreneur: Business Structure Basics
- Investopedia: Commercial
- Investopedia: Limited Liability Company - LLC
- Financial Times: Companies with a Purpose Beyond Profit Tend to Make More Money
- Korn Ferry Institute: Purpose Powered Success
- Norwich University: 7 Key Differences Between Nonprofit and For-profit Organizations