You have four choices for hosting business blogs. The best option is nearly always to host your blog on your own websites domain in a sub-directory.

When other websites link back to your blog you want the credit to go directly to your website domain. Adding new blog articles provides regular fresh content, and creates a larger website with more related content. This is ideal for SEO.

Marketing is the first thing to think about before exploring the options. Ask yourself what are the goals of your blog and does it differ to your business website.

Separate domains

If you wish to differentiate the target market or branding of your website and blog, you may have reason to host separately. You may be focusing on one particular product or targeting a younger or older audience.

Inbound links to your blog will have a negligible effect on your website especially while you blog builds reputation.

Sub-domains or Sub-directories?

A sub-domain appears to a visitor as www.subdomain.domain.com.au. A sub-directory appears to a visitor as www.domain.com.au/subdirectory.html. In the olden days Google treated a sub-domain as a separate website. Now they are treated much the same from an SEO perspective. As Internet users are more used to a sub-directory approach, it is preferred.

Sub-domains also need to be individually verified in Google's Webmaster Tools (which I hope you use!). Once a domain is verified your automatically verified for all sub-directories.

Hosted solutions (Wordpress, Blogger)

This is generally the easiest and cheapest way to setup a blog, and preferred by a lot of DIYers. If you are at all serious about SEO and ranking don't use a hosted solution. Your blog is setup as a subdomain of the host ie "yourname.blogger.com" . This means your SEO efforts benefit the Blogger or Wordpress domain. If you start here and move to your own domain later, you lose all the inbound links accumulated over time.

So separately host your blog and website on different domains if their marketing message differs, otherwise always host your blog on your business website domain in a sub-directory.