Knowledge of and application of financial terms or language is an ongoing process that requires continuous assessment and improvement. Not all terms are used in the everyday operation of an agribusiness, therefore activities such as inter alia, reading and listening to business related information aid immensely.
Articles of incorporation is the legal documentation of the business’s creation, including name, type of business, and type of business structure or incorporation. The creation or processing of this paperwork is one of the first tasks required to be undertaken to operate a business. Once submitted, the agribusiness’ articles of incorporation are kept on file with the appropriate governmental agencies or departments.
As a business is required to pay taxes, it is usually assigned a unique identity, usually referred to as an EIN (Employer Identification Number (EIN) or PIN (Personal Identification Number). This term of course varies from country to country.
Once the business is registered with the government tax body/authority/department, the EIN/PIN will be assigned and mailed to the business address. This number never changes, and it may be requested for business transactions.
A franchise agreement is a contract made between an agribusiness and a larger company that gives the agribusiness the right to operate as satellites of the larger company in a certain territory for a given period of time. The use of this allows the small agribusiness to take advantage of a brand name that is already familiar in the marketplace and to apply an already tested business process or operational plan.
Bankruptcy is a tool for businesses with severe financial challenges. The majority of the outstanding debts can be paid for or reduced through repayment of debts over time, or an opportunity to completely eliminate them. Agribusiness should be mindful that opting for bankruptcy should be given careful thought because it will have a negative effect on the business’s credit score.
Businesses can be classified according to their types or sizes. In terms of types there can be sole proprietorship, partnership, corporation and a limited liability company (LLC).
A sole proprietorship is a business owned and operated by a single person. The tax and legal liabilities of the business are accounted for by the owner. This means that there is no legal separation between the business and the owner.
When two or more individuals participate in the running of an agribusiness, it is knowns as a partnership. These individuals contribute resources and/or money to the business and share the profits and losses of the business. The shared profits and losses are recorded on each partner’s tax return. The sharing of these depends on the shareholding structure which is usually elaborated in the company/business registration paperwork.
In the event of a group of people acting as a single entity, the business is known as a corporation and the transition into this arrangement is known as incorporation. The owners are commonly described as shareholders who exchange consideration for the corporation’s common stock. Incorporating a business releases owners of the financial liability of business obligations, however a corporation comes with unfavourable taxation rules for the owners of the business.
A Limited Liability Company (LLC) is a fairly new business structure. It made its appearance in Wyoming 1977 and other states in the 1990s. A limited liability company combines the pass-through taxation benefits of a partnership with the limited liability benefits of a corporation.
Among the businesses classified in terms of size are small businesses, midsized enterprises and large businesses.
Small businesses usually refer to small owner-operated companies. Such businesses are overseen by one person or a small group of people with fewer than 100 employees. Typical companies found in this category are family, home-based, agri-clothing, agri-book companies, and small manufacturers.
These types of businesses can qualify for loans, grants, and in some countries for contracts or tenders where the governments limit competition to help small businesses acquire contracts or tenders.
Mid-sized enterprises are mediumsized companies with usually 100 to 249 employees or $10 million to less than $1 billion in annual gross sales.
Large businesses function with 250 or more employees and acquire more than $1 billion in gross receipts. They can be publicly-traded companies through which they issue corporate stock to finance operations. Usually, they are based in one country with international operations, and are organised by departments, such as human resources, finance, marketing, sales, and research and development.
According to Hayes (2022), unlike small and mid-sized enterprises, owned by a person or group of people, large organisations often separate their tax burden from their owners, who usually do not manage their companies but instead, an elected board of directors enacts most business decisions.
Examples of large agribusiness are Cargill, the Archer-Daniels-Midland Company (ADM), Bayer, John Deere and CHN Industrial.
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