A business undertaking maybe defined as an organisation operating under separate ownership, management and control and carrying on any business activity with independent risk-bearing.
All business undertakings are directly or indirectly engaged in the transfer or exchange of goods and services for value. They deal in goods and services on a regular basis.
Their main motive is to earn profits and they are exposed to various types of risks. The main characteristics of a business undertaking are as follows:
(i) Separate identity:
ADVERTISEMENTS:
Every business undertaking has its own identity. It has a distinct name and separate existence. Its assets and liabilities are separate from those of other undertakings. It maintains its own books of accounts
(ii) Independent ownership:
A business undertaking has an independent unit of ownership. Its owners may be an individual, a group of persons or the Government.
(iii) Independent Management:
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The form of organisation and management of an undertaking depends upon its nature, size and legal requirements. But every business undertaking has its own independent management. The management of one undertaking does not interfere in the working of other undertakings.
The management of each undertaking takes independent decisions concerning different aspects of business.
(iv) Element of risk:
Every business undertaking involves risk. Profit is the reward for bearing risk. The risk of an undertaking is borne by its owners though some of the risks may be covered through insurance.