Scientific research with an economic focus has long determined what should be called the main feature of entrepreneurial activity. Is this definition vital for IP owners? If you ask an ordinary entrepreneur what the signs of his activity are, he will name a lot of practical aspects, but will not say the exact definition of this concept. And he will be absolutely right. An entrepreneur must be able to work, produce and sell, invest and develop production, and let knowledge of theory by heart be inherent in scientists.
We suggest studying the topic from a practical perspective so that the entrepreneur, after reading this article, receives maximum benefit for his work.
The main feature of the work of an individual entrepreneur
Entrepreneurship is the ability to conduct business activities, engage in a process that generates profit. But at the plant, many thousands of people are also involved in such a process or part of a process, and they are not entrepreneurs. The reason for this is that they do not work independently, for themselves, they work for the owner or for a group of them. An entrepreneur carries out activities only independently, he determines what he will do, how much he will work, what profit he wants to receive per month, per year, whether he will invest money in development or immediately spend it on himself. Consequently, the main feature of entrepreneurial activity is independence of actions, decision-making and everything related to work.
In slightly different words, but preserving exactly this meaning, this definition is given in the Civil Code, in Article 2. Entrepreneurial activity has a number of other characteristics, according to this wording:
- the activity is carried out by the entrepreneur at his own peril and risk, that is, actions can lead to the collapse of the enterprise or at least to negative consequences;
- the work is aimed at regular, systematic profit generation;
- profit is generated from the sale or purchase of goods, services, property, and work;
- the activity has economic accounting of all transactions;
- all transactions are interconnected;
- in the process of activity, stable economic relationships are formed with sellers, buyers, agents and partners.
To perform all these functions, a businessman must be registered with the tax office as an individual entrepreneur. How to do this, and what pitfalls you may encounter, read in our other articles. It should be noted that entrepreneurial activity will be recognized as legal and competent only when it is carried out regularly and constantly. If a businessman is engaged in one-time transactions, then he cannot be called an entrepreneur. For example, having sold two houses in a year at the request of friends, a person does not become an entrepreneur. And if he opened his own real estate agency and put the business on stream, systematically making a profit, then we can say that he is engaged in entrepreneurial activity.
In connection with the above, we can reformulate our thesis and believe that the main feature of entrepreneurial activity is the regular, systematic receipt of profit as a result of an independently organized and produced production process.
The practical importance of knowing the signs of an entrepreneur’s activity
You have your own business, you are a registered individual entrepreneur, the types of activities correspond to those indicated in the classifier. And now you have read what should distinguish you from other market participants. Is everything listed here inherent in your enterprise? If you have found all the signs in your work, especially the main one, then you have a solid foundation for work. If something is missing, or some sign is not very pronounced, then you should work on it. All aspects of an entrepreneur's work must be present in your practical activities and must have their place in your development strategy. If not, add them in, these will be your new areas of activity that are useful to work on.
Selected aspects of entrepreneurial activity
Now let’s take a closer look at all of the above and additional signs of entrepreneurial activity.
- The activity of an entrepreneur must be precisely economic, that is, participate in the general economic process of the country. This is the acquisition and sale of any goods, their production, provision of services, performance of work. If the activity does not meet these requirements, then it cannot be recognized as entrepreneurial, and it is subject to some other taxation system, but not the one that applies to entrepreneurs.
- An individual entrepreneur, whose activities are permitted by law, carries out work only on his own behalf. If he sells a product, saying chairs from the Ivanovo Furniture Plant, then he is not an entrepreneur, but a sales agent working at this plant. If he is engaged in entrepreneurial activity, he must say - chairs from the individual entrepreneur Petrov, produced at the Ivanovo Furniture Factory. This language should be used in commercial proposals, advertising, reports and other documents. All goods that an individual entrepreneur sells must appear as the goods of an entrepreneur, and this entrepreneur is responsible for it, they will bring defects to it, he must provide after-sales service.
- The entrepreneur makes all transactions at his own risk, with the exception of insured transactions. No one is responsible for the negative consequences of transactions except the entrepreneur himself. In the event of litigation, only the entrepreneur bears full financial and legal responsibility for losses incurred or harm caused that arose as a result of transactions. The worst thing that can happen due to such liability is the complete bankruptcy of the individual entrepreneur, but not in the legal sense of this term. Legally, the entrepreneur is liable for all losses with personal property.
- The activities of an entrepreneur are always aimed at making a profit. If he takes steps that do not bring profit, then he ceases to be an entrepreneur. As a result, he faces ruin, and he will absolutely have to liquidate his individual entrepreneur by paying off his debts. And if an entrepreneur quite consciously distributes goods without making a profit, then this can be called charity, philanthropy, humanitarian aid, but not entrepreneurship.
- An individual entrepreneur must be registered with the tax office. If he has not been registered, therefore, in the process of concluding transactions he has no right to be called an individual entrepreneur. If a partner enters into a transaction with an unregistered entrepreneur, then he will pay tax on the transaction with a private person, and this is much more than with an individual entrepreneur. The partner will be obliged to conclude an agreement with such a negligent entrepreneur on the provision of services, performance of work, etc., and after receiving his salary, pay tax and make contributions to all funds. Respectable companies try not to cooperate with such persons due to the high cost of such relationships.
Rights and capacity of an entrepreneur
Entrepreneurial activity, which we are trying to define in this article, has another interesting feature - the legal capacity of a citizen. Entrepreneurial activity can be carried out by a person who has legal capacity and capacity.
Legal capacity is a person’s ability to have rights and bear certain responsibilities. As a rule, all citizens have rights in society, with the exception of those convicted and deprived of liberty. Incapacitated and sick citizens also have certain rights. Citizens of any gender, nationality, age, religion and other characteristics can have rights. These rights also include the right to conduct business activities. This means that almost any free person in society can open an individual entrepreneur and conduct independent work.
Along with rights, a number of responsibilities immediately arise, which are also enshrined in the law and in many administrative acts. An entrepreneur has financial responsibilities to the state in the form of paying taxes, to employees - in the form of creating comfortable working conditions and paying salaries, to suppliers - in complying with contractual obligations, and many others. All these responsibilities are regulated by the state. That is why it is important to know whether a person is legally capable in order to be able to ask him for his obligations.
It is important for an entrepreneur to know that he has a number of rights and to always use this knowledge. These are the following rights:
- conduct activities in one’s own name, because a name is the first and inalienable right of any person. It is this that becomes the subject of proceedings in cases of plagiarism; its inviolability is regulated by copyright law. The name can be changed by a person, but the entrepreneur is then obliged to change all his documents, that is, make changes to them regarding the name. Such documents include not only a passport and driver’s license, but also an individual entrepreneur registration document, all certificates and licenses, permits and contracts, etc.;
- the entrepreneur has the right to choose his place of residence and place of conduct of his business;
- he can own property, make transactions with it, transfer and bequeath it;
- has the right to engage in any business activity of his choice, not prohibited by law;
- the right to create other legal entities;
- the right to work in any other enterprise as an employee.
No one can be deprived of these rights, even if he expresses such a desire voluntarily. Only a court can limit a person’s rights if a crime has been committed.
Organizational and legal forms of entrepreneurial activity
By entrepreneurial activity, speaking about its forms, we mean commercial activity of any kind. Each form has its own characteristics and definition. So, business activity can be conducted as:
— individual enterprise;
— a legal entity with commercial and non-commercial activities;
- partnership - partnership;
- general partnership;
- partnership of faith;
— business company – LLC, OJSC, CJSC, company with additional liability;
- corporation;
- production cooperative;
- state enterprises.
Let us note once again that all of these organizational and legal forms of entrepreneurial activity relate to the general concept of entrepreneurship, among them there are individual entrepreneurs. If you want to use terms correctly, then there is no need to confuse the two names.
So, you now know the signs that should be characteristic of your enterprise, what rights you have in connection with this. Now is the time to actively use them in accordance with the law.
E. Shchugoreva
The following video will tell you about some signs of entrepreneurial activity that were not mentioned in the text of this article, about the specific experience of creating and developing an individual enterprise:
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In a market economy, an important condition for an enterprise to achieve success and a condition for its development are entrepreneurship (business) and the entrepreneurial style of activity.
The development of entrepreneurship is closely related to the environment, which presupposes a certain economic, socio-cultural, technological, organizational, technical, and geographical situation.
The economic situation determines the presence of effective demand, the possibility of purchasing certain types of goods. It also includes the labor market, availability of jobs, surplus or shortage of labor. This also includes the availability and accessibility of funds.
The economic situation is influenced by the political situation. To a certain extent, the way an economy is managed is a result of the political goals and objectives of the government in power.
Entrepreneurship operates and develops within the appropriate legal environment. The system of tax regulations and laws has a significant impact on business development.
The technological environment reflects the level of scientific and technological development, which affects entrepreneurship through production automation, improvement of technological processes, and chemicalization.
The organizational and technical environment is characterized by the presence of business infrastructure (banks, legal, auditing firms, advertising agencies, transport, insurance companies, etc.). The physical or geographic environment includes a set of natural conditions that influence the location of enterprises.
Macroenvironment - economic, legal, political, socio-cultural, technological, physical (or geographical) conditions of activity that create the prerequisites for the development of entrepreneurship.
Before starting his business, an entrepreneur must have a sufficient understanding of the environment, or the general climate of entrepreneurship, inquire about the conditions and opportunities for investing money in various industries or regions, having previously studied the state of the market, i.e. supply and demand, in each of the industries that attract it and in each of the regions of interest.
Every entrepreneur must find himself in economic space - time, find his economic niche, as well as the time and place of organizing his enterprise.
Entrepreneurship is the search for new areas of rationalization and profitable investment of resources, the implementation of new combinations in production, movement into new markets, and the creation of new products. It is aimed at generating profits above the average level by most fully satisfying needs based on achievement - success and leadership in a particular area of economic activity in the creation of new products and technologies, in production, marketing, provision of services or other areas of activity.
An integral part of entrepreneurship is foresight, informed risk-taking and strategic management. Because of this, entrepreneurship becomes an active factor in the development of production.
Business and entrepreneurship is not just a field of activity, but also a special way of life and thinking. Business ability is a kind of talent. In addition, one must have determination, because an entrepreneur often risks all his capital.
The desire to become an entrepreneur has reasons, the main ones being the hope for personal independence (i.e. not having a “boss” over you), to achieve high incomes in new, non-traditional market niches, and to do what you love.
The concept of “entrepreneurship” in the encyclopedic dictionary of an entrepreneur is interpreted with the following definition.
Entrepreneurship(from the English entreprise) - initiative independent activity of citizens aimed at generating profit or personal income, carried out on their own behalf, under their own property responsibility or on behalf and under the legal responsibility of a legal entity. An entrepreneur can carry out any type of business activity not prohibited by law, including commercial intermediation, trade and purchasing, consulting and other activities, as well as transactions with securities, etc.
An entrepreneur in his activities is called upon to provide the necessary combination or the necessary combination of personal benefit with public benefit in order to obtain profit, which is required primarily for further investment in business activities, as well as to meet the social needs of the entrepreneur himself and pay taxes.
The most important features of entrepreneurship include:
· autonomy and independence of economic entities. Any entrepreneur is free to make a decision on this or that issue, naturally, within the framework of legal norms;
· economic interest. The main goal of entrepreneurship is to obtain the maximum possible profit. At the same time, by pursuing his purely personal interests of obtaining a high income, the entrepreneur also contributes to the achievement of public interest;
· economic risk and responsibility. Even with the most accurate calculations, risk uncertainty remains.
The listed most important signs of entrepreneurship are interconnected and act simultaneously.
An integral part of entrepreneurship is foresight and strategic management. Because of this, entrepreneurship becomes an active factor in the development of production.
Entrepreneurship as a special type of activity presupposes that the subjects of this activity have a certain way of thinking, a special style of economic behavior. This is manifested in a creative attitude to business, free expression of initiative, constant desire for innovation, search for unconventional solutions, and expansion of the scale of activity.
The main character in this matter is the entrepreneur himself. Possessing independence, he takes personal responsibility for the results of his activities. Interest, combined with responsibility, forces an entrepreneur to work in a tough regime.
The ability to make non-standard decisions and a creative approach to assessing a situation have always been highly valued in the business world. Looking for a client, money, currency, materials, transport, premises, contracts, connections, the right people, documents, workarounds is the inevitable lot of an entrepreneur.
To become an entrepreneur, it is not enough to own a certain amount of money or means of production: they must be properly managed so that they can bring in new money and profit. Only those who know how can be an entrepreneur. And he who knows how is, first of all, knowledgeable. Entrepreneurship must be learned, not only at first, but constantly.
The figure of the entrepreneur is one of the central ones in a market economy. It is with his activities that the progress of modern society and the dynamism of the economic system are primarily associated. An entrepreneur in general, and even more so an entrepreneur-owner, has a greater degree of freedom in making effective organizational and economic decisions, the implementation of which is carried out, as a rule, on the verge of reasonable risk. Caring about improving his personal well-being and, what is especially important to emphasize, bearing property responsibility for the result of production, he cannot afford to work ineffectively. As a result of this, as free enterprise develops, not only private, but also social production becomes the most rational and saving.
According to the legislation of the Republic of Belarus, an entrepreneur or business entity can be citizens of the country recognized as legally capable in the manner prescribed by law (not limited in legal capacity). Citizens of foreign states and stateless persons can act as entrepreneurs within the powers established by law.
Along with individual and private enterprises, collective entrepreneurship is allowed. The role of collective entrepreneurs (partners) are associations of citizens using both their own and legally acquired property.
The official status of an entrepreneur is acquired through his state registration either as a participant in individual entrepreneurship (without the use of hired labor) or as an enterprise (with the involvement of hired labor). An entrepreneur can act both as an individual and as a legal entity.
Legislation on entrepreneurship provides for the possibility of carrying out entrepreneurial activities using means of production, property, and valuables both by their owner himself and by another entity managing his property with the right of economic management granted by the owner.
Entrepreneurial style. In modern conditions, one of the decisive factors for the success or failure of an activity is the increasing instability of the enterprise’s external environment: events are becoming more and more unusual and cannot be recognized on the basis of past experience; The frequency of occurrence of unexpected events, sudden changes, and their unpredictability increases. In such conditions, it becomes impossible to manage production and commercial activities by reacting to problems that have already arisen on the basis of previous experience or its extrapolation. Foresight, research and creativity are required to respond in a timely and effective manner. These methods require strengthening the motives of entrepreneurship, as well as the use of specific models for making and implementing decisions that have important consequences.
The leading motives for entrepreneurship are:
· motives for personal self-expression, providing adequate living conditions for oneself and one’s family;
· motives for entrepreneurial reactions;
· motives of intra-company entrepreneurship;
· motives of competition and cooperation in the development of production and technology;
· motives for entrepreneurial risk.
These and other motives of entrepreneurship contribute to the transformation of incremental-type enterprises into entrepreneurial-type enterprises.
The entrepreneurial style of activity differs significantly from the widespread incremental style, which is aimed at minimizing deviations from traditional behavior both within the enterprise and in relations with suppliers, subcontractors, and consumers. Instilling an entrepreneurial style of behavior in an organization (property owners, management, core shareholders) is associated with changes in motivation, organizational structure, management system, level of training of managers and specialists as managers, and leadership style.
If the enterprise has firmly established an incremental style of behavior, in which any significant changes in the structure of the goods produced are considered undesirable, the chances of success of its activities will decrease as competition develops.
Enterprise goals.Incremental behavior involves optimizing profitability in relation to the current operating conditions of the enterprise. Entrepreneurial behavior is characterized by the desire to increase profitability potential, which is achieved by a continuous chain of innovations of both a technological and organizational nature.
Ways to achieve goals. An incremental type enterprise is guided by past experience, extrapolating it to current operating conditions. An enterprise-type enterprise determines the path to achieving a goal based on an assessment of the possibilities for making a profit and improving the quality of management.
Restrictions. With an incremental style of behavior, restrictions are determined by the environment and the internal capabilities of the enterprise. The entrepreneurial style is characterized by the ability to change the environment (for example, select the right suppliers of raw materials and technological equipment or change the nature of interaction with them), create new jobs, respond to different modes of behavior both inside and outside the enterprise (for example, changes in consumer behavior or a competitor in the market is perceived as a signal of the need for a competitive, innovative or entrepreneurial response; personnel resistance to innovation is overcome by the effort of social orientation of innovation, etc.).
System of rewards and penalties. In an incremental type enterprise, stability and the results of past activities are encouraged. In an entrepreneurial enterprise, creativity and initiative are encouraged and penalties are applied for lack of initiative.
Information. For an incremental style, internal information about the progress and results of activities and external information about the long-term scope of opportunities are sufficient. The entrepreneurial style requires internal information about opportunities (rather than outcomes) and external information about the global scope of opportunities.
Nature of the problems. Incremental behavior does not extend beyond repeated, familiar problems. Entrepreneurial behavior deals with new, non-repetitive problems.
Leadership style. The incremental leadership style is characterized by the desire for popularity and achieving unity of approaches; for the entrepreneurial style - allowing for risky actions and the ability to inspire people to embrace change.
Solving management problems. With incremental behavior, recognition of the need to act comes late, as it is a reaction to a problem that has arisen. When searching for alternatives, they rely on past experience and allow only minor deviations from the status quo. The only alternative to satisfy needs is considered. Entrepreneurial behavior is characterized by actively seeking opportunities and anticipating problems. There is a creative search for alternatives, the adoption of which necessitates major changes. Numerous alternatives are considered and the best is selected.
Risk attitude. Incremental behavior is characterized by the desire to minimize risk based on the use of past experience. Entrepreneurial behavior involves a willingness to take creative risks and balance a set of risky options.
Business is often interpreted as “making money out of money.” This definition does not contradict the truth, if we keep in mind that this happens through useful productive activities - the manufacture of goods, the provision of services. Behind the words “entrepreneurship and entrepreneur” there is a complex and significant matter. First, it is necessary to create a product (service) that is in demand, organize and finance its production and sale, and find a price that attracts buyers and at the same time ensures profit. This is, firstly, the organization of production, economic activity, and then the actual making of money.
Thus, entrepreneurship is, first of all, the organization of an enterprise, a rural farm, a retail outlet, a service enterprise, a bank, a law office, a research institution, a publishing house, etc., i.e. organization of production activities, production of a product (useful thing) or service (intangible product) that can bring profit.
The following main features of entrepreneurial activity can be identified.
The first sign of entrepreneurial activity is its initiative and independence.
Initiative and independence of entrepreneurial activity is expressed in two main norms of the Law of Ukraine “On Entrepreneurship”: 1) entrepreneurs have the right to make decisions without restrictions and carry out independently any activity that does not contradict current legislation (Article 3). This provision is specified in the principles of entrepreneurial activity (Article 5); 2) intervention of state bodies in the economic activities of entrepreneurs is not allowed if it does not affect the rights of state bodies provided for by the legislation of Ukraine to exercise control over the activities of entrepreneurs (Article 15).
Initiative and independence are the action-oriented nature of self-expression of entrepreneurs. Entrepreneurs actively choose to take the initiative. They consciously place themselves in situations where they are personally responsible for the success or failure of a business, and believe that successes and obstacles are within their own control and influence, so they can influence the outcome of their actions. This quality is combined with a focus on taking initiative through motivational management and the desire for personal responsibility.
The second sign of entrepreneurial activity is a creative and innovative nature, which is manifested in the search for new opportunities and focus on innovation. The entrepreneur acts and is assessed as an independent and largely self-reliant innovator.
The third sign of entrepreneurial activity is systematicity (regularity, professionalism, consistency).
The fourth sign of entrepreneurial activity is its risky nature, i.e. placing on the entrepreneur the burden of foreseeing adverse consequences (losses) and taking measures to prevent or eliminate them that are not related to the guilty behavior of the entrepreneur.
The fifth sign is the target orientation towards making a profit.
The purpose of entrepreneurial activity and the result of such purposeful activity should not be confused. This or that activity cannot be classified as entrepreneurial if its goal is not to make a profit. But if a profit is not received, despite the target orientation of the activity to achieve it, then this fact in itself cannot serve as a basis for excluding it from the category of entrepreneurial activity. Consequently, the determining factor is the presence of the goal of making a profit, and not the achievement of obtaining it at any stage of this complex activity. The presence of a goal of making a profit does not exclude the possibility of not achieving this goal in entrepreneurial activity (as in any other purposeful activity) and, even, on the contrary, obtaining the opposite result (losses, bankruptcy).
Thus, the goal of making a profit is a necessary feature of entrepreneurial activity. However, this should not lead to its exaggeration and designation as the main (main) feature. It seems wrong both to deny the goal of making a profit as a necessary feature, and, on the contrary, to exaggerate it, since all the signs of entrepreneurial activity are equally essential for defining its concept.
It seems correct to designate the goal of making a profit as the main, but not the only goal.
The sixth sign is independent legal responsibility.
The seventh characteristic of entrepreneurial activity is socially responsible character.
Although social responsibility has different content and forms for individual industries and business entities, basic obligations exist for all entrepreneurs - these are the obligations of entrepreneurs towards society, which extend to many areas.
The following basic requirements for the social responsibility of entrepreneurs in modern society can be noted:
the requirement to increase the efficiency of entrepreneurs (to be more efficient and progressive, to produce better goods and services, to guarantee the quality of consumer goods, to minimize the harm caused to public welfare due to non-compliance with ethical rules);
demanding more complete responsibility of legal entities - business entities to interested groups of persons (for example, shareholders, employees) and the creation of corporate democracy;
the requirement for entrepreneurs to assume greater responsibility for the well-being of the entire society;
demanding a greater positive role for businesses in protecting the environment.
None of the signs of entrepreneurial activity is either dominant or the only one. All of them are equally important for the scientific definition of entrepreneurship, but only together they can determine it.
Thus, the signs of entrepreneurial activity are:
1) initiative and independence - an entrepreneur has the right to make decisions without restrictions and independently carry out any activities that do not contradict the law;
2) creative and innovative nature - search for new opportunities, focus on innovation;
3) systematicity - regularity, professionalism, permanent nature;
4) risky nature - placing on the entrepreneur the burden of foreseeing adverse consequences and applying measures to prevent and eliminate them;
5) target orientation towards making a profit, the maximization of which is the main goal of the activity;
6) independent legal liability;
7) socially responsible character.
More on topic 2. Signs of entrepreneurship:
- Chapter VII ABOUT FIVE VARIETIES OF GENERAL IDEAS: GENERUS, SPECIES, SPECIES DIFFERENCES, OWN CHARACTERISTS, RANDOM CHARACTERISTS
Free trade zones (FTZs) specialize in operations for the reception, warehousing, and processing of imported goods (packaging, labeling, quality control, finishing, etc.) for their sale on the domestic market. Similar FTA operations are carried out in relation to exported goods. Typically, FTZs are created at seaports, airports, intersections of transport communications, and border regions.
Free economic zones
Special economic zones
Concept special economic zones combines several types of special organization of economic life in compact (usually) territories. Types and subtypes of special zones differ in purpose (functions) and regulation mechanisms. In all cases, special economic conditions are fixed by relevant regulations.
The main feature of a free economic zone (FEZ): on its territory there are no customs conditions (tariff and non-tariff) mandatory for the main territory of the country, i.e. in the national customs space, the SEZ is an exception. There are several typologies of special economic zones. For example, OECD experts distinguish three main types: free trade zones, enterprise zones, and reconversion zones. We will adhere to a typology that is more consistent with Russian practice. However, we note that not all types of special zones have become widespread in Russia.
SEZs are created with the aim of attracting foreign investment, new technologies and progressive management experience, increasing and diversifying exports, and developing import-substituting industries. Since state support for SEZs requires significant financial resources (direct investments, compensation for lost tax revenues, etc.) and institutional efforts (creation of special laws, control, etc.), the number of SEZs created should not be large. Otherwise, the formation and development of SEZs risks turning into a sluggish process that creates obstacles to the development of the main territory of the country.
The selection of territories to which SEZ status is granted is carried out on the basis of the possibility of obtaining a significant effect from government expenditures and provided economic benefits, or to overcome the depressive (crisis) state of the corresponding territory.
In world practice, there are a number of types of SEZs.
The trade function of the SEZ is often combined with industrial production (primarily the production of exported and import-substituting products). Enterprises located in the SEZ, in addition to exemption from customs duties on imported means of production and exported finished products, are provided with benefits on taxes, rent, the use of depreciation deductions, etc. SEZs can also specialize in the provision of banking, insurance, tourism and other services.
Over the years of its existence, China's special zones have attracted tens of billions of foreign investments, which, combined with public and private domestic investments, have made it possible to create high-tech industries, develop exports, master best management practices, and become beacons of a market economy and technological progress for the entire country.
The specified criteria for the success of SEZs are also applied in other countries. Basically, the creation of SEZs brought positive results. However, in world practice there are many examples of low effectiveness of SEZs, mainly due to a weak initial investment push, unsystematic introduction of economic benefits, insufficient competitiveness of the created industries in comparison with other regions within the country and abroad, and uncontrolled development of shadow economic activities.
Enterprise zones are local territories within which preferential treatment is established for entrepreneurs in order to enhance economic activity, reduce unemployment, and increase household incomes. But these zones, unlike SEZs, do not have the status of extraterritoriality.
As a rule, such zones are created with special permission in depressed and degraded parts of cities. In order to revive small and medium-sized businesses in them, the state and municipalities are liberalizing control over the structure of activity, prices, wages, employment, exempting them from local property taxes, issuing preferential loans, allowing accelerated depreciation, etc. These relaxations and incentives are aimed primarily at increasing investment. Local authorities are simplifying the procedures for obtaining a business permit, and reporting on performance results is being reduced.
Enterprise zones are created for a limited period. In various US states the limit ranges from 5 to 20 years, in the UK and Belgium - 10 years, in Spain - 3 years with the possibility of extension.
In the United States, the Federal Law on Enterprise Zones was adopted in 1983, and already in 1984 similar laws were introduced in 21 states. Areas with a population of about 4 thousand unemployed people, an area of up to 300 hectares, and a population poverty level above average could become an enterprise zone. In 1995, there were about 1,400 such zones in the country. Their development programs include not only the conditions and guidelines for production activities, but also the tasks of improving healthcare, education, and social security.
Those wishing to start a business would do well to know what an entrepreneur is and his activities.
The activities of an entrepreneur are aimed at regularly receiving profit from the following operations: use of property, production and sale of goods, carrying out work, providing services. A businessman is someone who is engaged in such activities by registering himself in the manner prescribed by law. They do business independently and at their own risk.
Another definition of this term: an activity of an intellectual nature, inherent in an initiative and enterprising person who has the resources to carry out this activity. An entrepreneur acts in his own financial interests (making a profit) while providing benefits to society (creating jobs, producing a product).
What is the most important thing in business?
Independence
It can be property or organizational. The first implies that the entrepreneur has and manages his property, which he uses in business.
The second means that the entrepreneur independently makes decisions regarding his business. His independence is manifested at all stages - from the moment of making a decision to conduct a certain activity to making a profit from it. A businessman acts on his own initiative and does not obey anyone’s orders or instructions. This distinguishes the activities of an entrepreneur from labor, where the employee fulfills the requirements and instructions of management.
Systematicity
Entrepreneurship is not an action, but a process that takes some time. Systematicity is one of the main characteristics of a business, and its main criterion is the regularity of profits for a certain reporting period.
Property liability
An entrepreneur risks his property - corporate and/or his own, depending on the legal form within which the company operates.
Formality
You can conduct business only after registering an individual as an entrepreneur and the company itself. Any activity aimed at making a profit is illegal without registration.
Focus on regular profit generation
The goal of any business is systematic income. If it does not generate income (due to a crisis situation at the enterprise or in the country), but is aimed at this, then it can also be called entrepreneurial. If the activity does not set itself the goal of generating income, then it is not of a commercial nature and therefore cannot be considered as such.
Risk
Business is always associated with risk - organizational, economic, financial. Moreover, some types of risks depend on the entrepreneur, while others do not (for example, certain changes in the country’s legislation that affected the company’s activities). A businessman can insure his business to protect himself from unexpected expenses associated with risks. Any types of risks motivate him to more thoughtful and successful work.
Read also: What is risk management.
Competence
A businessman must have theoretical and practical skills in this area and specialized education. However, professionalism is not required for all types of activities. It is more likely for those types of businesses that can be engaged in after obtaining a license (for example, notary services).
Continuous search for business resources
An entrepreneur is constantly looking for new sources that will ensure his success. These are: money, technology, equipment, raw materials, materials, premises, labor, clients and partners. He is not allowed to stand still in developing his business, otherwise there is a great risk of failure.
Types of business
Depending on the sector of the economy, the content of the work, and the methods of carrying out various operations. Entrepreneurial activity is:
- Commercial. This type is the most common. Commercial entrepreneurship is associated with any form of exchange of goods for money or for another product.
- Production. It is based on the fact that an entrepreneur produces various goods with the help of special equipment, technologies and other resources. Of course, the word “himself” does not mean that the businessman does it with his own hands. This is done by the enterprise he founded.
- Financial and credit. In it, the main goods are money, securities, and currency values. This type is the most complex and requires the extraordinary mind of an entrepreneur, special skills and abilities.
- Advisory. This is the provision of services related to the provision of advice, recommendations, analysis, expert assessments, and diagnostics. The most common type of such business is consulting.
- Farmer's. The law sets requirements for farming. For example, only people who are related can be members of one farm. In some cases, the presence of participants who are not relatives of the head of the farm is allowed, but there can be a maximum of five of these people. Their task is to manage the farm, with the further sale of the grown resources.
- Intermediary. Here the businessman himself does not produce or sell anything, but acts as an intermediary between sellers and buyers.
- Insurance. The most risky because it is associated with unforeseen circumstances. Because of this, the client needs to pay a certain amount in accordance with the signed insurance conditions. Insurance companies' profits come from customer contributions.
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