It is such an easy concept if you think about it. But let’s put in words its real definition and discuss different types of companies. A company is a legal entity that is created to operate a business. The creator can be either a group or a sole individual who would like to conduct commercial or industrial business. The jurisdiction of every state has predefined corporate laws that dictate the variety of company organization ways including rules for taxing and financial liabilities.
The creators of a company can choose a type that suits their needs and future activities as of partnerships, proprietorships, or corporations. Another way of distinguishing companies is deciding whether it is private or public. Each type involves different regulations, financial reporting, and structures of ownership. What is a similar characteristic for all types is that they are aimed at earning profit.
Explaining the basics
How does a company work? Well, basically it is an artificial person. Corporate personhood given to a company is what mainly differentiates from individuals who are a part of the company. As mentioned earlier, companies are traditionally made for earning a profit, yet there is an exception which is nonprofit charities.
Although countries have specific regulations regarding the definition of company types and their organizations, many similarities can be found around the world. It is also important to mention that companies have very similar rights to the ones an individual has. For examples, we can take the right to pay taxes, hire employees, enter into contracts, or borrow funds.
When it comes to finding benefits of starting a company, we can talk about certain freedom that is given by an opportunity of income diversification, visible correlation between effort and reward, flexibility. However, there are disadvantages as well: responsibilities for staff, legal liability, financial responsibility, and possible long work hours.
In this part, we will discuss basic the basic company classifications. It diversifies:
- Partnerships – formal arrangements of two or more parties who manage and operate a business together;
- Corporations – legal entities that are separate from their owners, have their own corporate personhood;
- Associations – any group of individuals who create a legal entity together for social, business, or other purposes. The structure and purpose dictates the rules of taxation for this type;
- Funds – businesses involved in pooled capital investing;
- Trusts – a third party holds assets on behalf of beneficiaries.
Do you need to create a legal entity for your business intentions? Do not hesitate to entrust this administrative process to the team of COREDO.