The key difference between trade and business is that trade involves buying and selling of goods, whereas business involves all activities performed by a business entity including, buying and selling, advertising, marketing, etc.
The two terms trade or business generally include any activity an individual or a group of individuals carry out for the generation of income from selling goods or performing services. As you can see from the above key difference, trade is part of business activity, and business is a term we use for all the activities a business enterprise performs.
What is Trade?
Trade is a basic economic concept involving the buying and selling of goods and services. In other words, this is the exchange of goods or services between parties or compensation a buyer pays to a seller. It can happen within an economy between manufacturers and consumers. Trade always involves a medium of exchange, such as cash. When goods and services are exchanged for other goods and services without the use of money, we call this a barter form of trade.
Basically, there are two types of trade: home (internal) trade and international trade. Internal trade is conducted within the country, usually in terms of wholesale and retail. International trade, on the other hand, permits countries to share goods and services and will help to expand markets. Moreover, international trade creates market competition and diversity. By the development of international trade, people can buy any product from the market. If it is not available in the local market, they can even buy from international markets, or even order online. For instance, an Indian consumer can choose between a Japanese, German or Indian car. International trade has introduced greater competition to the market and therefore, more competitive prices, bringing cheaper products to the consumer.
Moreover, import and export are two important terms in trading. If a product is sold to the global market, it is an export, and if a product is bought from the global market, it is an import.
Trade does not only include goods; it can also involve services. Tourism, banking, consulting and transportation are some examples of service trading.
What is Business?
A business can be defined as “an organization or enterprising entity engaged in commercial, industrial, or professional activities”. It can either refer to for-profit entities or non-profit organizations that operate to fulfill a charitable mission or further a social cause. It can also refer to organized activities of individuals to manufacture and sell goods and services in order to gain profit. Moreover, the term business can include the business of a sole proprietorship to an international corporation.
Every business needs a business plan. A business plan is a formal document detailing a business’s goals and objectives, and its strategies to drive the goals and objectives. Business plans are very important when borrowing capital to start operations.
The legal structure of the business is one of the key elements in a business. Depending on the type of business, it may have various legal requirements such as securing permits, adhering to registration requirements and obtaining licenses to legally operate. In many countries, corporations are considered to be juridical persons. That means; business can own property, take on debt, and face lawsuits.
What is the Relationship Between Trade and Business?
Trade is part of business activity, and business is a term that includes all the activities performed by a business enterprise. The term trade or business generally includes any activity an individual or a group of individuals carry out for the generation of income from selling goods or performing services.
What is the Difference Between Trade and Business?
Trade is basically buying and selling of goods and services, Business, on the other hand, refers to all those activities conducted to make a profit. It includes business operations such as producing and selling goods or provision of services, investing activities such as buying or selling of long-term assets, and financing activities such as the issuance of shares or bonds, repurchase of company stock, payment of dividends, advertising and marketing. Therefore, trade is a component of business activity. And, this is the key difference between trade and business. Moreover, trade always involves profit, whereas there are both for-profit and non-profit businesses. So, this is also a major difference between trade and business.
Summary – Trade vs Business
The key difference between trade and business is that trade is a component of business and includes buying and selling of products and services, whereas business is a combination of activities to earn profits.
1. “Business.” Investopedia, Available here.