Legally, a distinction exists between a business and a company, such as a corporation or cooperative, though the terms are often used interchangeably in everyday conversation. Corporations differ from sole proprietorships and partnerships in that they are separate legal entities from their shareholders. This separation provides limited liability, protecting owners and members from personal responsibility for the company’s debts. Corporations are also subject to corporate tax rates and are required to submit regular financial reports to national or state regulatory authorities. While setting up and maintaining a corporation can be more complex and costly, it offers significant protections and benefits for owners and shareholders.

Most individuals who are not employed by government agencies (public sector) or nonprofit organizations (charity sector) work in the private sector. These employees are typically employed by businesses—either formal or informal—whose main objective is to generate profit by creating and capturing economic value above costs. In nearly all countries, the majority of workers are employed in the private sector, highlighting the central role of businesses in global economies.