Each business activity is carried out in the format of organizational forms, which are selected by the owner. The choice of form itself may depend on many factors. Among the main motives that affect the choice of the legal form of entrepreneurship are:
- Initial capital.
- The nature of the activities of the future company.
- Personal preferences.
But first you need to decide on the concept of business entities and forms of entrepreneurship. In economic theory, this is a set of norms that determine relations within a firm, as well as its relations with other firms and the state.
Among the main three groups can be distinguished - individual, collective and corporate.
Individual forms
This is the most common and simplest form of entrepreneurship. Most often in this case, all the activities in the leadership of this organization are performed by one person or family. It is important to consider that an individual entrepreneur is not a legal entity (unlike other forms of entrepreneurship). At the same time, the owner does not need to do all the work himself, he can use hired labor, but in small quantities. You can attract as many as 20 people. IP is the most common form of small businesses. It is convenient and allows you to successfully conduct a business.
In this form of small business, the main advantage is what is its weakness - in its size. Since the owner is represented in one person, he can quickly make any decisions without consulting anyone. This form is perfect in areas where it is necessary to respond quickly, depending on changes in the market rate and other external factors; large capital is not required, because individual entrepreneurs, as a rule, do not have one. Among the shortcomings of this form, one can single out the concentration of all functions in one hand. This person should have knowledge in the field of marketing, economics and production itself.
Collective forms
Interestingly, these forms became very popular in the 20th century. Three main ones are distinguished among them: business partnerships (divided into full partnerships and so-called faith partnerships, or limited partnerships), business companies, joint-stock companies. Let's consider these types in more detail.
Business partnerships
This form of small and medium-sized businesses appeared in conditions when there was a need to unite a group of people to achieve certain personal goals. The advantages of this form are the combination of capital and forces, the sharing of risk and responsibility between members of the organization. Such organizations are divided into full partnerships and partnerships on faith.
Full partnerships
The first form is a company based on collective initial capital, uniting a group of individuals or legal entities to conduct joint activities on the basis of an agreement. All participants in a full partnership bear full responsibility in equal shares. This form has one feature. The enterprise itself takes the form of a legal entity, but while maintaining the status of a legal entity - participants of this partnership.
In this partnership, each participant can act on behalf of the partnership, concluding transactions and participating in negotiations. The organization must have an authorized person, but it cannot be the sole decision-maker, since each participant has the right to act on his own. Even one vote against any decisions suspends the activities of the enterprise. This form of organization gives wide independence and gives initiative to each participant.
Partnerships on faith
The second form is partnerships on faith, or limited partnerships. Under this form, a certain circle of persons bears unlimited responsibility, and the rest are only responsible for that part of the company that is within their investment. All participants are jointly and severally liable, and capital is also formed from the sums of contributions of the participants in the partnership.
All participants can be divided into two groups. The first is the actual participants in the partnership, that is, authorized persons who bear full responsibility to other participants, carry out activities and have the right to make decisions. The second group is the participants-investors who only form capital and are responsible as part of their contribution.
Business Companies
They can be divided into limited liability companies and additional liability companies. LLCs are an association of participants for the purpose of conducting entrepreneurial activity, they are a legal entity and can conclude agreements on their own behalf, apply to court with orders, and have their rights and obligations. LLCs should consist of two or more participants, but have an upper threshold for the strength of their composition. If a company exceeds this number, then it will be transformed into a joint-stock company. Members of the company participate in the organization’s activities, depending on the share of the contribution to the capital of this organization, receive profit in the form of dividends.
ODOs are formed due to the authorized capital, which is divided into certain shares. Such a company is a type of LLC, so almost all legal and legislative standards are the same. The main difference is that if the company does not fulfill its obligations under credit obligations, then the participants risk their personal property according to the shares of the capital invested by them.
Joint Stock Companies
This is a form of business organization in which there is a pool of capital for joint activities. This form is similar to business societies, but the difference is that if mainly people’s forces unite there, then the main thing is the unification of capital. Similar is the responsibility that investors bear according to their shares in the capital. AO is also a legal entity and is responsible to creditors.
The main advantage of the joint-stock company is the possibility of attracting additional capital by issuing new shares, but at the same time the number of participants increases, and the company's capital is split into smaller parts. AO is created indefinitely, but this is unless otherwise provided by the charter of the enterprise. The authorized capital consists of a certain number of shares and must be a multiple of 10. By law, there is a lower threshold for the creation of joint-stock companies. It is important to take into account that the authorized capital should be equal to or less than the total property held by the company. Management is divided into supervisory, executive and supreme bodies. They can be divided into closed, where shares and capital are redistributed between shareholders closed, and open, where additional shares can be acquired by any person. AOs can have branches at home and abroad.
Corporate Forms
Corporate form implies a combination of several companies to solve production or financial issues. Such cooperation allows firms to maintain the status of a legal entity and the powers of executives, because the leaders of associations do not have the right to dispose of individual companies in full. Among the main ones, one can distinguish a concern and a consortium.
The concern is a voluntary association of several companies to solve joint production issues. Most often, these are companies of the same industry, which are combined to solve production, scientific, technical and environmental functions. But there are intersectoral concerns.
A consortium is an association of several companies on a voluntary basis to resolve a specific issue. The association is temporary. In the Russian Federation, this form was created with the support of state programs. After performing these functions, consortia cease to operate.