What is a company?
If you decide to do business or your work is related to cooperation with various legal entities, it becomes necessary to understand what a company, enterprise, branch, etc. is. In our article we will talk about firms. Let us see what is called a firm, what it does, what types of firms are.
Definition and basic properties
A firm is a company that produces something for sale. It can be both services and goods. It is believed that any organization can be called a firm if it is characterized by the following features:
- the purpose of creation is the production of goods or services;
- sells production results;
- owners make a profit from the sale.
Without firms, the existence of an economic society is impossible. For the buyer, they are the source of various goods for which there is a demand. For a worker, a firm is a workplace. For the owner, the company is a source of income and the realization of their ideas. For the country's economy, a firm is a source of taxes and social funds.
A person who creates a company for his own or borrowed funds is called an entrepreneur. The main task of an entrepreneur is to use available resources for the production or sale of something that brings profit. This is not for everyone. 3 of the 4 newly established firms cease to exist, and not developed. In the best case, a person manages to return his investments, in the worst - he loses them too.
In order to reduce the risk of failure, each new company sets up certain tasks that must define
- subject of production;
- volume of production;
- production technology and its organization;
- ways to promote products on the market;
- prices for the sale of goods;
- device work firm.
Types of companies
Russian legislation involves various types of ownership of firms. The simplest form of organization is a private (individual) company. Officially, the investor of such a company is called an entrepreneur without a legal entity. Such a company creates one person, he is its sole and absolute owner. He decides how the work of the enterprise will be organized and should not share net profit with anyone.Individual firms are usually small in size, because it is difficult for one person to collect the required amount of investment to create a large organization. Typically, such firms operate in areas with rapid turnover: trade, the service sector. Organizations of this type are often short-lived, because they do not have the resources to develop and keep themselves afloat in the event of a crisis.
Another form of ownership is an economic partnership in the form of a full partnership and a limited partnership (limited partnership). In this case, the contributors are a few people. In a full partnership, all participants take part in the process of managing a firm and are responsible for its activities. In a partnership on faith, the organization of the work of the company involved several participants. The rest only invest money and receive the agreed part of the profit. But at the same time, in case of losses, they are also responsible for them. Such organizations are more stable and durable, since larger amounts are invested in them.
There are also larger firmswhich include joint stock companies. In this case, the entire capital of the company is distributed in equal shares between a certain type of securities - shares. Investors buy a certain number of shares for which the company is developing. Shareholders of the company bear minimal risk, since they are not responsible for the obligations of the company, although they bear the risk of losses, but only within the value of their shares.
This type of business allows you to attract significant capital, while small investors minimally interfere in the activities of their company. Owners of joint stock companies are subject to double taxation. They pay the first tax on profits earned by the firm, and the second - on personal income. In addition, work with shareholders is laborious work, but if an entrepreneur does not have the opportunity to attract large capital in another way, this is the only way out.
All of the above companies are privately owned.
In addition to it, there are also state and private-state forms. In the first case, the contributor to the company is the state.Private-state are firms in which the state acquired a controlling stake, which allows it to influence the organization’s activities.
For more information about the types of firms, see the article What are firms.
We hope that with the help of our article you have understood the questions of what a company is, what types of companies are and what characteristics it has.