Before starting a business, all businessmen must decide which legal form of enterprise they choose. To do this, one should focus on the area in which work is planned, whether a large, medium or small business will be built, and also take into account the financial capabilities of the businessman and the purpose of opening a business.
What issues are initially addressed?
Before opening a company, an entrepreneur must immediately answer several significant questions. These include:
- what sources of financing will be used to open and develop the enterprise, since for this exclusively own funds or borrowed funds of banks can be used;
- whether investors will be involved, and if the answer to this question is positive, then it is necessary to choose a legal form of the company that will suit the requirements of large investors;
- what is planned turnover per month and year;
- whether there will be predominantly non-cash or cash payments;
- Will a business sale be needed in the future.
The choice of the legal form of the enterprise depends on the answers received. There are several forms that differ in the rules and nuances of doing business.
The concept of organizational forms
Initially, you should decide what constitutes an organizational form.
The legal forms of organizations and enterprises are represented by the forms of activity fixed by law. Based on them, all the rights and obligations that are vested in the company are determined, and it is also established how the company can manage its existing assets.
They differ in different criteria:
- the purpose of opening an enterprise;
- ownership form chosen for the company;
- rights vested in the organization;
- composition of owners.
The following organizational and legal forms of activity are distinguished in the Civil Code:
- Commercial organizations. Their goal is profit. Further, these cash receipts are distributed among all participants in the enterprise.
- Nonprofit enterprises. The purpose of their creation is not to earn money, but if you still manage to make a profit, then it is not given to the owners, but is sent to the goals specified in the charter documentation.
Each option has its own characteristics. Standard legal forms of organizations and enterprises are represented by varieties:
- partnerships and companies: full partnership and faith, LLC, ODO, OJSC, ZAO and affiliates;
- production cooperatives;
- state and municipal enterprises;
- non-profit organizations.
All these varieties have their own nuances of opening and running a business. The above basic organizational and legal forms of enterprises can be opened exclusively when taking into account the requirements of the law and various rules.
Partnerships and Societies
Such forms are considered the most common. They usually open for profit. They have several participants at once, although an LLC can be opened by one founder.
They are divided into several varieties. All types of legal forms of enterprises, represented by companies or partnerships, have the status of legal entity.
Partnerships
They are presented in several varieties. Each view has its own nuances:
- Full partnership. Its participants are different citizens, formalizing the status of participants in the company. They conclude a special agreement with each other, on the basis of which they are engaged in entrepreneurship on behalf of a common enterprise. They are jointly and severally liable with their property for all obligations belonging to the company. Management is carried out with the consent of all participants. Each of them has a voice, with the help of which different issues are resolved at meetings. Most often, full partnerships are opened in the field of agriculture or the provision of services to the public. As a rule, they are small enterprises, therefore, tax and state bodies do not have difficulties with control.
- Partnership on faith. This legal form of enterprises is similar to a full partnership, but at the same time there is one commandant or several investors who are not involved in entrepreneurial activity. They risk the obligations of the company exclusively by invested funds. This form is used when opening sufficiently large organizations, since it is possible to attract unlimited large investors who do not risk their personal property.
The above legal forms of enterprises are not considered very popular, since the opening of companies is considered simpler.
Partnership Benefits
The benefits of opening partnerships include:
- simplicity of organization, since there is no need for numerous bureaucratic procedures, so just an agreement is concluded with all participants;
- due to the large number of participants, various financial or labor opportunities and resources of the organization increase;
- several participants are engaged in management at once, therefore a high specialization in enterprise management is guaranteed.
But at the same time, partnerships are not without significant minuses.
Disadvantages of Partnerships
At the first stages of the work, the negative aspects of the partnership are usually impossible to notice, but after a long operation of the company significant minuses are revealed. Such legal forms of commercial enterprises have the following disadvantages:
- often one or more participants do not realize the main purpose of the entire company, therefore their interests are incompatible with the desires of other entrepreneurs, which leads to inconsistent policies, and often to bankruptcy of the enterprise;
- in the process of development of the company financial resources begin to be limited, which does not allow to use the full potential of the enterprise, since any developing business requires additional investments;
- it is difficult to determine the share of each participant in the total profit or loss, therefore it is impossible to fairly distribute profits and assets;
- if one of the members of such a company decides to leave the partnership, it is impossible to predict the future fate of the enterprise, since the participant has the right to receive a part of all the property of the enterprise on the basis of its share, therefore, under such conditions, many firms are simply liquidated;
- unlimited liability is considered unattractive to participants, since each entrepreneur is forced to bear responsibility not only for his work and decisions made, but also for the activities of other participants and the whole partnership.
In Russia, partnerships are not considered very attractive. Therefore, when answering the question, what organizational and legal form of the enterprise is considered the most relevant, the most frequently selected companies.
Limited liability company
It is considered one of the most popular and frequently used forms. LLC features include:
- the founder of an LLC may be one person or several persons;
- the authorized capital is divided into several parts between all founders, after which the information is recorded in the charter documentation;
- participants do not meet personal property for the obligations of the enterprise;
- all losses are covered only within the limits of the contributed funds to the authorized capital;
- this form is most common among small and medium-sized businesses.
Among the many legal forms of enterprises, a limited liability company is considered one of the most effective and simple in organization.
Additional liability company
ODO is also considered a fairly demanded form. To open such a company can be one person or several founders. The main features of this legal form of business enterprises include the fact that the founders bear subsidiary liability for debts with their property in a multiple of the size of the contribution.
The size of the share of each founder is prescribed in the constituent documentation.
If one of the participants declares himself bankrupt, then the responsibility is distributed among all the founders on the basis of the size of their contribution. But a different distribution procedure may be provided for in the charter.
Joint-stock company
It is represented by an enterprise in which the authorized capital is divided into a number of shares. Members of such an organization are not liable for obligations with personal property. They will never suffer personal losses related to the work of the enterprise, therefore they risk only invested funds.
An exception would be shareholders who did not pay for fully purchased shares. Joint liability for obligations of the joint-stock company is provided for them, but only to the extent of the amount that is insufficient to pay for the securities.
Quite often, such organizational and legal forms of enterprises are used. A joint stock company can be represented in several forms:
- OJSC This company is different in that its participants can alienate their securities without first obtaining consent from other shareholders to this process. The company has the right to openly subscribe to its securities, as well as sell them in an open form. In this case, numerous legislative conditions must be taken into account. The characterization of the legal form of the enterprise of the JSC indicates the need for such a company to openly publish its financial and accounting documents every year.
- COMPANY. Shares in such a company can be distributed exclusively between the owners of the company or other persons who are previously determined during the formation of the company. The company is not allowed to conduct an open subscription or sell securities to third parties. CJSC shareholders have a preemptive right to purchase shares sold by other participants. The charter acts as constituent documentation. Capital is formed from the nominal price of equity securities of the organization purchased by shareholders. Top management is represented by a meeting of shareholders. It may appoint a board of directors and a chairman if the number of all participants exceeds 50.
This legal form of ownership of the enterprise is considered complex, since its opening requires significant capital. The management procedure is complicated, and there will always be close attention from the tax authorities.
Pros and Cons of AO
Joint-stock companies have many undeniable advantages. But at the same time they are usually chosen if necessary to create a large enterprise. The main advantages include the following:
- it is possible to accumulate significant financial resources due to the additional issue of shares;
- financial resources can be quickly transferred to other industries;
- shares may be transferred or sold to other persons; therefore, the company operates regardless of how the composition of the joint-stock company changes;
- shareholders bear only limited liability for obligations, therefore they risk only invested capital, unlike individual entrepreneurs who are forced to sell their own property to cover losses;
- The company shares the functions of managers and owners of capital.
Due to the above advantages, these organizational forms of enterprises are so popular. Large manufacturing companies are most often represented by a public company or a closed joint stock company.
Disadvantages of AO
Joint-stock companies have not only advantages, but also significant disadvantages. These include:
- it is difficult to register a charter, since it is necessary to coordinate any important point with all the founders, and you also have to deal with bureaucracy;
- shareholders often abuse their powers and capabilities, therefore they issue unsecured capital stocks that do not have real value;
- dividends are required to be paid on shares, which often leads to double taxation, since initially income tax is levied on dividends represented by profit, and after transfer of funds to shareholders, personal income tax is calculated and paid;
- if the company has too many participants, then some shareholders will not be able to exert any influence on the operation of the enterprise.
Thus, before opening such a company, one should correctly think over the information entered into the constituent documentation, and one must also be able to properly manage the company so as not to encounter numerous difficulties.
Production cooperative
In another way, such organizations are called artels. Such organizational and legal forms of enterprises are quite rare. Cooperatives are represented by voluntary associations of people who are members of this organization. It is intended for collaboration, which may be associated with any production. It is allowed to use cooperatives in other areas of work, for example, when carrying out trading activities, marketing agricultural products or providing services.
The legislation allows the participation of other companies in such an organization. Cooperatives are represented by commercial enterprises, so their work is aimed at making a profit.
The charter, where all members of the general meeting are registered, acts as a constituent document. All property belonging to such an organization is distributed into separate units belonging to the members of the enterprise on the basis of the data available in the constituent documentation.
The cooperative lacks the ability to issue shares. Each member of such an enterprise has one vote, used in solving different issues or making various decisions.
Unitary enterprise
It is represented by a commercial company that does not have ownership of any property assigned to it by the owner.
Such organizational and legal forms of enterprises are quite rare. Unitary enterprises have indivisible property, which in no way can be distributed among the participants or employees of the company.
Such forms are used exclusively by the state or municipal authorities. The company can manage the property assigned to it, but cannot transfer it to its property. If the manager is any government body, then such an organization is called treasury.
IP
This organizational form is considered the most simple and often used in Russia. It does not imply the formation of a legal entity, therefore, the entrepreneur acts as an individual.
The advantages of choosing this method of doing business include:
- simplicity and speed of execution, after which you can immediately begin to conduct direct activities;
- the entrepreneur’s earnings depend on the success of his work, which is an effective motivational factor for the development of activities;
- the owner of such a business is free to manage all cash receipts;
- Entrepreneurs can choose simplified taxation regimes for which low rates are set, as well as many taxes are replaced with a single fee, which greatly simplifies accounting and reduces the tax burden on the businessman.
In addition, it is necessary to highlight the farms that also do business without registration of legal entity status. The head of such an organization becomes an entrepreneur after the registration of a holding.
Which form is relevant?
The choice depends on different parameters. Which legal form of an enterprise is ideal for a business can be said only after studying the characteristics:
- selected field of activity;
- how many people are planned to work in the company;
- whether the enterprise will regularly develop;
- who is in the target audience;
- whether it is necessary to work with VAT;
- whether investment capital will be attracted;
- how many business founders are initially available.
In accordance with these conditions, you can choose the perfect option for the enterprise. .
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