Business Concepts: Structure, Operations, and Legal Forms

Posted on Dec 10, 2024 in Economy

Business Concept

An economic unit of production of goods and services adds value through a process of production or service provision. This is performed using an ordered set of human factors, financial resources, and technical assets. The question is achieving certain objectives driven by the address.

Components of a Company

  • Human factors
  • Heritage
  • Organization
  • Environment

Business Relations

A company receives payment for the sale of goods and services and makes payments for the delivery of inputs, acquisition of physical goods, and services.

Objectives of a Company

A company aims to achieve specific goals at a given time, taking into account the surrounding environment. The primary goal is to maximize profit by minimizing costs. Social objectives include creating jobs, supplying the population, creating wealth, respecting the environment, and, more importantly, achieving growth (increased market power). This relates to the company’s economic profitability and productivity.

Business as a System

A business is a set of interrelated elements within the global economic system.

Characteristics

  • It is an open, global system composed of a combination of elements or subsystems.
  • A company is a self-controlled system.

Functional Areas

  • Financial: Raising funds needed to carry out various investments. These funds may be foreign or self-financed.
  • Commercial: Distributing the product in the external world.
  • Production: Transformation of production factors into finished or semi-finished products fit for sale.
  • Coordination Functions: Planning and control activities to establish a set of objectives and targets. This is controlled by the management of each area.

Knight’s Risk Theory of the Entrepreneur

This theory emphasizes the ability to take risks in an uncertain world and advance rents. Paying before collecting sales involves uncertain benefits that outweigh the risks assumed. It involves interpreting consumers’ wishes, deciding what to produce, and setting the sales price.

Knight Distinguishes Two Activities

  • Director: Organize and manage.
  • Entrepreneur: Take risks and choose the director. These roles can be filled by the same person.

The main contribution is understanding uncertainty and risk.

Schumpeter’s Theory of the Innovative Entrepreneur

This theory focuses on identifying and launching a new business opportunity, leveraging an invention. The risk is not necessarily assumed by the person exploiting the invention but by the one who finances it. It involves invention, innovation, and imitation.

Current Vision of the Entrepreneur

The entrepreneur operates in a context of market globalization, competition, technological change, information access, political changes, and sociological changes. The entrepreneur is a professional manager who plans, directs, organizes, and controls the business.

Size of Enterprises

  • Micro: 0-9 workers (96%)
  • Small: 10-49 workers, less than 10 million in sales, and total assets equal to 3%
  • Medium: 50-249 workers, sales and total assets less than 43 million, representing 0.42%
  • Large: More than 250 workers, total assets greater than 43 million, and sales exceeding 50 million, representing 0.07%

Ownership of Equity

  • Private Enterprise: Owned by individuals or legal entities.
  • Public Enterprise: Owned by the state or autonomous communities.
  • Mixed Enterprise: Some capital is owned by public entities, while others are owned by individuals and private companies.

Activity

  • Productive: Obtaining finished or semi-finished products.
  • Commercial: Not producing but selling to other companies.
  • Services: Neither producing nor selling but providing services.

Legal Forms

  • Unlimited Liability: Owners or partners are liable for all debts.
  • Limited Liability: Liability is limited to the amount of contributions.
  • Mixed Liability: Some partners have unlimited liability, while others have limited liability.

The choice of legal form is affected by the volume of economic means, the number of participants in the initial idea, the asset liability desired, the tax implications, and the distribution of power.

Municipal Formalities

The town hall handles procedures or local administration where the work is located. These include construction license applications, which involve the payment of taxes on buildings and municipal structures, and opening licenses.

Porter’s Five Forces

Potential Competitors: Barriers to Entry

  • Capital needed for the development of the activity (e.g., according to business type).
  • Special permits to develop the activity (examples).
  • An area with a lot of competition from others with the same knowledge of the activity.

Current Competitors

  • High competence in the development of the activity.
  • No high exit barriers.

Suppliers and Customers

The power of business with suppliers and the relationship with customer loyalty are important. However, having many customers gives the firm power, but not total power.

Type of Business

Examples.

Sole Proprietor

A natural person with legal capacity, routinely self-employed, of legal age, and with free disposition of property. Liability is unlimited.

Community of Goods

Minimum of two persons. Responsibility is commensurate with their contributions.

Companies

A legal entity with independent rights and obligations, split capital, and ownership of property.

Capitalist Societies

Essential major contribution: Sociedad Anónima (SA), Sociedad Limitada (SL), and limited partnership.

Sociedad Anónima (SA)

A corporation with one or more partners, natural or legal persons, who bring together a minimum capital of €60,000 divided into shares.

Requirements for Constitution

Public deed registered in the commercial register with the statutes:

  • Title of the company: SA
  • Objects: Activities it performs.
  • Duration: Indefinite.
  • Registered office
  • Social capital: Expressing the form of unpaid shares.
  • Number of shares: Into which the capital is divided, nominal value, class, and series.
  • Structure of the governing body
  • Mode of deliberation and agreements
  • Year-end date
  • Other lawful agreements and special conditions desired by partners

Creation of the SA

  • Simultaneous Foundation: All shares are subscribed to at the time of creation.
  • Successive Foundation: Shares are disbursed after the constitution is subscribed.

All shares must be fully subscribed, and at least 25% of the value of each share must be paid up.

Shares

The shareholder receives shares for the contributions made. The transfer of shares is free when entered in the register and represented by book entries.

Types of Shares
  • Nominative: The owner’s name is expressed on the share.
  • Bearer: Belongs to whoever possesses it.
  • Ordinary: No special rights.
  • Privileged: They have privileges.
Shareholders’ Rights
  • To receive dividends.
  • To participate in the assets resulting from liquidation.
  • Preferential subscription in capital increases.
  • Attendance and voting at a shareholders’ meeting.
  • Information on the issues at hand.
  • To challenge corporate resolutions.
Organs of the SA
  • Administrators: Executive, general management, and internal representation.
  • General Meetings: Decision-making body of the company.

Sociedad Limitada (SL)

One or more partners, natural or legal persons, contribute between €3,005 divided into indivisible shares.

Requirements for Constitution

A public deed is entered in the commercial register with the articles of association. Simultaneous foundation is not supported, and no passive dividends are allowed. Capital must be paid from the beginning.

Shares

Capital is divided into indivisible shares that are not negotiable.

Social Interest Companies

Sociedad Laboral (Worker-Owned Company)

Over 50% of its capital must be owned by its employees. This applies to both SA and SL forms.

Characteristics
  • Capital is divided into shares.
  • Each share requires a disbursement of 25% to 100% of equity.
  • Minimum capital: €60,101 for SAL, €3,005 for SLL.
  • No member may own more than 1/3 of the share capital.
  • If a public entity owns shares, it cannot exceed 49%.
  • There must be at least 3 partners, 2 of whom are workers.
Shares and Participation
  • Working class for workers.
  • General class for the rest.

The company cannot hire non-partner workers.

Cooperative Society

Variable capital and democratic management structure with freedom of association. It develops business, imputing economic results to members once community funds are served, as a function of the activity performed.

Characteristics

  • Democratic governance.
  • Allocation of surplus produced, with 30% going to a reserve fund.
  • Non-profit; its purpose is to meet the needs of its members.
  • Minimum capital is fixed in the statutes.

Organs of Cooperatives

  • General Assembly: The sovereign will of the society.
  • Governing Council: Organ of government, management, and representation.

Classes of Cooperatives

Associated work, consumers and users, housing, agriculture, export community, services, sea transport, insurance, education, health, and mixed credit.