A business firm is an organization that uses resources to produce goods and services that are sold to consumers, other firms, or the government. Most businesses exist because a group of people working together can be more effective than a group of people working individually.

Firms are grouped into three types: sole proprietorships, partnerships, and companies.

A sole proprietorship is a business that is owned by one individual. This owner makes all the business decisions, receives all the profits or losses of thefirm, and is legally responsible for the debts of the firm.

A type of business organization in which two or more individuals pool money, skills, and other resources, and share profit and loss in accordance with terms of the partnership agreement. In absence of such agreement, a partnership is assumed to exist where the participants in an enterprise agree to share the associated risks and rewards proportionately.

A company is a legal entity, allowed by legislation, which permits a group of people, as shareholders, to apply to the government for an independent organization to be created, which can then focus on pursuing set objectives, and empowered with legal rights which are usually only reserved for individuals, such as to sue and be sued, own property, hire employees or loan and borrow money.