Types of Companies and Business Structures
Unit 2: The Company
Definition
The company is the institution or agent that makes economic decisions on the utilization of production factors for goods and services offered in the market.
New Concept: The company is a universal tool used to produce and provide the public with most of the goods and services available in the economy.
The Entrepreneur
An entrepreneur is a person who provides the capital and, at the same time, performs functions of organization, management, planning, and control. In many cases, they are the origin of the company.
Entrepreneurs have innovative ideas about processes and products, acting as agents of economic development and diffusion.
New Concept: The current entrepreneur is an individual or collective organ that makes decisions to achieve certain business goals, considering the circumstances of the environment.
The individual or collective entrepreneur coordinates the company’s internal operations with the economic and social environment.
Types of Companies by Sector
- Primary Sector: Companies whose business element is derived directly from nature (e.g., timber, oil, fisheries).
- Secondary or Industrial Sector: Companies that perform some process of transformation of raw materials (e.g., construction, optics, textiles).
- Tertiary or Services Sector: Companies whose main element is the human capacity to perform physical or intellectual labor (e.g., telecommunications, insurance).
Types of Companies by Size
- Big Business: Manage large capital and financing, have extensive sales facilities, employ thousands of people, possess advanced administration and operation systems, and have ample capacity to obtain loans from major national and international institutions.
- Medium Business: Involve hundreds of people in well-defined areas with limited functions and responsibilities. They also have automated systems and procedures.
- Small Business: Independent entities that aim to be profitable and dominate their industry niche. They are privately owned and have limited annual sales, capital, and staff.
- Microenterprise: Usually individually owned, with artisanal production systems. The machinery and equipment used are elementary, and their systems and procedures are generally handled by the manager or owner.
Types of Companies by Other Criteria
- Property as Capital: Private, single, or mixed.
- According to Area of Operation: Local, regional, provincial, national, multinational.
- According to Legal Form:
Legal Forms of Companies
- Unipersonal: The employer or owner is a person with legal capacity to trade, who is personally liable for all business debts.
- Collective: Owned by more than one person, with unlimited liability for members. Members contribute with their heritage and participate in the leadership and management of the business.
- Capitalist
- Collective unlimited
- Industrial
- Cooperative: Aim to satisfy the economic needs and interests of the cooperative members, who can be their own suppliers or employees of the company.
- Partnership: Possess two types of partners:
- Limited partners: Liability is limited to capital contribution.
- Collective partners: Have unlimited liability.
- Limited Liability Company: Members’ liability is limited to their capital contribution and the company’s assets.
- Anonymous Society (Corporation): Limited liability companies where capital is provided through shares. Anyone can acquire shares, increasing the company’s capital. Characterized by an unlimited number of partners who contribute capital.
- Capital stock is presented.
- Shareholders have limited liability.
- Strictly capital companies with an unlimited number of shareholders.
- Unlimited lifespan; death or incapacity of a partner does not dissolve the company.
- Business name should be related to its purpose, not the partners’ names.
Technical Efficiency
Knowledge of technology is crucial for companies seeking technical efficiency. They aim to minimize the use of production factors for a given quantity of product. Economic efficiency is based on the cheapest production method for a set of factor prices.
- Technique “A”: Employs 2 units of capital and 14 units of labor.
- Technique “B”: Uses 4 units of capital and 8 units of labor.
- Technique “C”: Employs 3 units of capital and 17 units of labor.