Understanding Business: Types, Functions, and Structures

Posted on Aug 6, 2024 in Economy

TEMA 1: Business Definition, Elements, Objectives, and Functions

Concept of Enterprise

An organization composed of labor and capital as factors of production, dedicated to industrial, commercial, and service delivery, aiming for profit and responsibility.

Elements of a Company

  1. Capital Instruments: All elements comprising the balance sheet assets, enabling capital accumulation for production. These consist of:
  • Technical Capital: Long-term company assets necessary for its activities.
  • Intangible Assets: Rights related to patents, applications, or trademarks.
  • Financial Capital: Liquid financial resources forming the company’s treasury.
Human Element: The active element of production, categorized into three groups:
  • Workers and Employees: Offer labor and expertise in exchange for a salary.
  • Entrepreneur: Individual(s) responsible for the production process.
  • Owners: Control the company or act as financial investors.
Organization: Combining passive and active factors to achieve a goal, with elements like:
  • Common Goal: Integrating individual objectives.
  • Combination of People and Resources: Enabling the desired objective.
  • Relationship System: Distributing tasks to achieve the objective.
Environment: External factors influencing the company’s development, encompassing rules and relationships.

Company Performance

Activities undertaken by the employer for producing and distributing goods and services for profit. Functional areas include:

  • Finance: Fundraising and investment.
  • Production: Supply and transformation.
  • Marketing: Distribution.
  • Human Resources: Organization and personnel management.
  • R&D: Research, development, and innovation.
  • Administration: Record-keeping of company transactions.

Objectives of a Company

  • Maximize Profitability: Seeking the highest profit relative to investment.
  • Capital Growth and Market Power: Aiming for growth and market dominance for future benefits.
  • Stability and Adaptation: Ensuring survival and adapting to the environment.
  • Social Responsibility: Maintaining stable employment and developing useful products.

TEMA 2: Business Classifications

Criteria for categorizing companies:

1. Size

  • Small, Medium, and Large Enterprises
  • Multinational Companies and SMEs
  • Criteria include sales volume, assets, number of workers, and profits.

2. Economic Sector

  • Primary Sector: Utilizing natural resources (agriculture, livestock).
  • Secondary Sector: Processing raw materials (mining, energy, industry, construction).
  • Tertiary Sector: Providing services.

3. Scope

  • Local, Provincial, Regional, National, and Multinational Companies

4. Basic Function

  • Producing Companies: Transforming raw materials into products.
  • Trading Enterprises: Facilitating exchange relations.
  • Service Companies: Providing services.

5. Legal Form

  • Sole Trader: An individual owner.
  • Social Entrepreneur: A legal person or partnership.
  • Types: Limited Company, Collective Society, Limited Partnership, Cooperative Society, LLCs.

6. Ownership of Capital

  • Private Enterprise: Owned by individuals.
  • Public Enterprise: Owned by the state or a public body.
  • Joint Ventures: Shared ownership between public and private entities.

TEMA 3: Public Corporation: Definition, Formation, Capital, and Organs

A capitalistic society with capital divided into shares, limiting partner liability to their contribution. The name is arbitrary, followed by “SA.” Minimum capital is €60,101.21, with 25% paid at the time of establishment.

Share Rights

1. Economic Rights

  • Dividend Right: Participating in profit distribution.
  • Preemptive Right: Priority in participating in capital increases.
  • Settlement Share Right: Participating in asset division upon liquidation.

2. Political Rights

  • Voting Right: Participating in the Annual General Meeting.
  • Information Right: Receiving necessary information for informed voting.
  • Challenge Right: Contesting unfavorable arrangements.

Company Organs

  • General Meeting of Shareholders: Shareholders’ meeting to decide on company affairs. Types include:
    • Annual General Meeting: Held within the first six months of each fiscal year.
    • Extraordinary General Meeting: Multiple meetings possible throughout the year.
    • Universal Board: Meeting with the presence of the entire share capital.
  • Administrators: Individuals managing the company.
    • Sole Administrator: A single administrator.
    • Multiple Administrators: Acting in solidarity (one’s actions bind all) or jointly (requiring involvement of two or more).
    • Board of Directors: Elected by the General Meeting.
  • Audit: Verifying the accuracy and compliance of financial reports prepared by administrators. Types include:
    • Successive Audit: For large companies with complex processes.
    • Simultaneous Audit: Requires the presence of all founding members.