Doing business: Overview, definition, and example
What is doing business?
"Doing business" refers to the activities conducted by a person, company, or entity to engage in commerce, trade, or provide services for profit. It includes any operations or actions taken with the goal of generating revenue, such as selling goods or services, entering contracts, conducting negotiations, or maintaining relationships with customers, suppliers, and other stakeholders. "Doing business" can apply to a variety of sectors and industries, including manufacturing, retail, finance, technology, and more.
In a legal context, "doing business" can also refer to the jurisdiction in which a company or entity is legally recognized and taxed. A company that is "doing business" in a state or country may be subject to the local laws, taxes, and regulations.
Why is doing business important?
Doing business is crucial because it is the foundation of economic activity, enabling individuals and organizations to generate income, create jobs, and contribute to overall economic growth. For companies, "doing business" represents the core of their operations—producing goods or services that are sold to customers or clients in exchange for revenue. A clear understanding of the scope of doing business is also essential for legal and tax purposes, ensuring that companies comply with the appropriate regulations and fulfill their obligations to tax authorities.
In the global marketplace, the ability to effectively do business across borders has become increasingly important, allowing companies to expand their market reach and access new opportunities for growth and profit.
Understanding doing business through an example
Imagine a small business owner, Jane, who runs a bakery. She is "doing business" by preparing and selling baked goods to customers in her local area. She enters into contracts with suppliers for raw materials, such as flour and sugar, and negotiates prices with local cafes to provide them with pastries. She also markets her business through social media and handles customer inquiries. All of these activities are part of her "doing business" operations.
In another example, a multinational technology company like Apple is "doing business" by designing, manufacturing, and selling its products worldwide. The company engages in marketing, sets up retail stores, enters into licensing agreements, and manages distribution networks across various countries. Apple’s operations in each country represent "doing business" in those jurisdictions and require compliance with local laws, tax regulations, and business practices.
Example of a "doing business" clause
Here’s how a "doing business" clause might appear in a contract:
“The Company acknowledges that it is conducting business in the State of [insert state/country] and agrees to comply with all applicable laws, regulations, and licensing requirements in that jurisdiction while carrying out its business activities.”
Conclusion
"Doing business" encompasses a wide range of activities involved in the operation and management of a company, from sales and marketing to contract negotiations and compliance with legal and tax requirements. Whether on a local, national, or global scale, businesses engage in these activities to generate income, support their growth, and contribute to the economy. Understanding the scope and requirements of doing business is essential for both businesses and individuals to ensure compliance with relevant laws and to effectively operate in a competitive marketplace.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.