DNS Domains / Subdomains question

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Hi,

I have scoured the net looking for the answer to this question to no avail. 

I am considering setting up a web server to host some commercial sites that I 
maintain. In order to keep the cost down for businesses, I would like to  
assign web addresses that use one domain...... example:

I own the domain www.business.com [I wish!] and Joe's Bakery wants a website. 
I want to be able to give them the web address joesbakery.business.com, so 
they do not need to pay for a web address, but so it still looks better  than 
www.business.com/joesbakery/ .  What are the rules for doing this?

I may have my own web server, or possibly continue to host the sites with a 
hosting service under the business.com domain. 

I hope I explained this correctly. Any info or help appreciated.

jim