Nature of Business (What It Is and What You Must Know)

The meaning of “Nature of Business” varies from person to person. It is basically a statement about what the company offers to its clients, legal structure of the company, the industry it belongs to, and other features of the company. For example, “private sector” companies are named so because of their nature of earning profits. Similarly, “manufacturing sector” companies are called so because they are mainly concerned with the manufacturing operations. If someone refers to a company as a “corporation”, it means that they are assessing the legal structure of the company for qualifying its nature.

Today I will mainly talk about what “nature of business” actually means, its definition, the different categories of “nature of business”, types of “nature of business”, types of organization, business classification, examples of “nature of business” (like manufacturing business, merchandising business, and service business). If you want to know about the “nature of business” and the things related to it, you are at the right place! I will breakdown each and everything in detail for you, so that you don’t find it difficult to understand. Keep reading!

What is “Nature of Business”?

The phrase “Nature of Business” basically refers to the overall existence and purpose of a company withing an industry or a market sector. Nature of business mainly refers to the:

  • Type of services and products offered by the company.
  • The type of industry in which the company operates.
  • The overall purpose and mission of the company.
  • All the other characteristics and features of the business.

The “nature” can be classified into different categories. They are:

  • By service or product
  • By the organizational setup
  • By the organizational structure
  • By the type of business

Types of “Nature of Business”

The different types of “nature of business” are:

  • Public sector
  • Non-profit sector
  • Manufacturing sector
  • Service sector
  • Merchandising sector
  • Technology sector
  • Private sector
  • International sector
  • Military sector
  • Government sector

Types of Organization

The organizational setup of a company can be:

  • A limited liability partnership
  • A limited liability company
  • A sole proprietorship
  • A partnership
  • A corporation

Business Classification

All companies can be divided into several categories based on its industry classification. The two commonly used business classifications are:

  • The North American Industry Classification System
  • The Standard Industrial Classification


Service Business

It is a type of business that involves providing tangible products to its customers. The service business is subdivided into:

  • Repair shops
  • Salons
  • Banks
  • Marketing consultants
  • Software consultants
  • Medical practitioners
  • Public relations firms
  • Accounting firms
  • Law firms

Merchandising Business

This type of business involves the buying of products at wholesale and selling them at the retail price. The main goal is to sell the product at a price higher than the cost price. Some examples of merchandising business are:

  • Resellers
  • Distributers
  • Convenience stores
  • Grocery stores

Manufacturing Business

It is a type of business that involves the purchasing of products and combining them to form something new! These businesses are mainly associated with transforming the existing products (like raw material, etc.) into manufactured goods.

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