Business Basics 101 – Key Terms You Need To Know
A business is simply defined as any entity or organization engaged in business, commercial, or administrative activities for the benefit of others. Businesses may be privately owned, for-profit or non-profitable corporations or organizations that perform a given activity to meet a social cause or further a charitable purpose. Companies also include government agencies, non-profits and private schools.
A key term in business law is NPO (Neutral Point Of Profit). An NPO represents an account of the types of sales transactions made on behalf of the corporation or other entity conducting business. In general terms, an NPO represents an agreement between the business and a third party with respect to the type of sales transaction between the business and the individual or entity conducting the transaction. For instance, a corporation might have an NPO with a customer who purchases from the business. The customer then pays the NPO to the corporation for the price the corporation charges for the product or service.
Corporations are different from individuals because corporations are not allowed to give away their profits to their own shareholders. Instead, corporations are restricted to paying taxes on only the income they generated through their businesses. Income derived from personal transactions is exempt from corporate taxation. In most cases, corporations are taxed according to the individual rates; however, exceptions are made for capital gains and dividends. Business owners can use special provisions in the contract to exempt some or all of their income from taxation; these provisions are called tax benefits.