7 Different Types of Companies You Should Know About
If you are interested in starting a business or working for one, you might want to know about the different types of companies that exist. A company is a legal entity that can conduct business activities, such as selling goods or services, hiring employees, paying taxes, and so on. However, not all companies are the same. Depending on their structure, ownership, liability, and taxation, they can have different advantages and disadvantages.
In this article, we will explain the main features and characteristics of seven different types of companies that are common in many countries. These are:
- Sole proprietorship
- Partnership
- Limited liability company (LLC)
- Corporation
- Cooperative
- Nonprofit organization
- Social enterprise
Sole Proprietorship
A sole proprietorship is the simplest and most common type of company. It is owned and operated by one person, who is also the sole decision-maker and manager. The owner has full control over the business and can keep all the profits. However, the owner also has unlimited personal liability for the debts and obligations of the business. This means that if the business fails or gets sued, the owner’s personal assets, such as bank accounts, car, or house, can be seized to pay off the creditors.
A sole proprietorship does not have a separate legal identity from its owner. It is not registered with the government and does not pay corporate taxes. Instead, the owner reports the income and expenses of the business on his or her personal income tax return. A sole proprietorship is easy to start and end, as it does not require any formal paperwork or fees.
Some examples of sole proprietorships are freelancers, consultants, artists, and small retailers.
Partnership
A partnership is a type of company that is owned and run by two or more people who agree to share the profits and losses of the business. The partners can be individuals, corporations, or other entities. The partners have joint authority and responsibility for managing the business and making decisions. They also have joint and several liability for the debts and obligations of the business. This means that each partner is liable for the entire amount of the debt, not just his or her share.
A partnership does not have a separate legal identity from its owners. It is not registered with the government and does not pay corporate taxes. Instead, each partner reports his or her share of the income and expenses of the business on his or her personal income tax return. A partnership is relatively easy to form and dissolve, as it does not require any formal paperwork or fees. However, it is advisable to have a written partnership agreement that specifies the rights and duties of each partner, such as how to divide the profits, resolve disputes, admit new partners, or end the partnership.
Some examples of partnerships are law firms, accounting firms, medical practices, and consulting firms.
Limited Liability Company (LLC)
A limited liability company (LLC) is a type of company that combines some features of a partnership and a corporation. It is owned by one or more members who can be individuals, corporations, or other entities. The members have limited liability for the debts and obligations of the business. This means that they are only liable up to the amount of their investment in the company. Their personal assets are protected from creditors.
An LLC has a separate legal identity from its owners. It is registered with the government and pays corporate taxes on its income. However, an LLC can also choose to be taxed as a partnership or a sole proprietorship if it meets certain criteria. This allows an LLC to avoid double taxation, which occurs when a corporation pays taxes on its income and then distributes dividends to its shareholders who pay taxes again on their personal income.
An LLC is more flexible than a corporation in terms of management and governance. It does not have to follow strict rules regarding board meetings, annual reports, or shareholder rights. Instead, an LLC can adopt its own operating agreement that defines how it will be run and how profits will be distributed among its members.
Some examples of LLCs are restaurants, hotels, software companies, and online businesses.
Corporation
A corporation is a type of company that has a separate legal identity from its owners. It is owned by shareholders who buy shares of stock in exchange for a share of the profits. The shareholders have limited liability for the debts and obligations of the business. This means that they are only liable up to the amount of their investment in the company. Their personal assets are protected from creditors.
A corporation is registered with the government and pays corporate taxes on its income. It also has to follow strict rules regarding board meetings,
annual reports, shareholder rights, and so on. A corporation is managed by a board of directors who are elected by the shareholders. The board appoints officers who run the day-to-day operations of the business.
A corporation can raise capital by issuing more shares of stock or by borrowing money from banks or investors. A corporation can also merge with or acquire other corporations to expand its market share or diversify its products or services.
Some examples of corporations are Apple, Coca-Cola, Walmart, and Microsoft.
Cooperative
A cooperative is a type of company that is owned and controlled by its members who have a common interest or goal. The members can be consumers, workers, producers, or suppliers. The members share the profits and losses of the business according to their contribution or participation. The members also have equal voting rights and decision-making power in the management and governance of the business.
A cooperative has a separate legal identity from its owners. It is registered with the government and pays corporate taxes on its income. However, a cooperative can also choose to be taxed as a partnership or a sole proprietorship if it meets certain criteria. This allows a cooperative to avoid double taxation, which occurs when a corporation pays taxes on its income and then distributes dividends to its shareholders who pay taxes again on their personal income.
A cooperative is more democratic than a corporation in terms of management and governance. It does not have a board of directors or officers who are appointed by shareholders. Instead, it has a general assembly of members who elect a board of directors or a management committee who run the business.
Some examples of cooperatives are credit unions, farmer cooperatives, housing cooperatives, and consumer cooperatives.
Nonprofit Organization
A nonprofit organization is a type of company that is not driven by profit but by a social, charitable, educational, religious, or environmental mission. A nonprofit organization is owned by its members who support its cause and vision. The members do not receive any dividends or profits from the business. Instead, any surplus income is reinvested in the organization to further its mission.
A nonprofit organization has a separate legal identity from its owners. It is registered with the government and may be exempt from paying corporate taxes if it meets certain criteria. However, a nonprofit organization may still have to pay taxes on some types of income, such as unrelated business income or investment income.
A nonprofit organization is managed by a board of directors who are elected by the members. The board appoints officers who run the day-to-day operations of the business.
A nonprofit organization can raise funds by soliciting donations from individuals, foundations, corporations, or governments. A nonprofit organization can also generate income by selling goods or services that are related to its mission.
Some examples of nonprofit organizations are Red Cross, UNICEF, Greenpeace, and Amnesty International.
Social Enterprise
A social enterprise is a type of company that aims to achieve both social and financial goals. A social enterprise is owned by its founders, investors, or stakeholders who share its vision and values. The owners receive a reasonable return on their investment but also measure their success by their social impact and environmental sustainability.
A social enterprise has a separate legal identity from its owners. It is registered with the government and pays corporate taxes on its income. However, a social enterprise may also benefit from tax incentives or subsidies if it meets certain criteria.
A social enterprise is managed by its founders, investors, or stakeholders who make strategic decisions and oversee the operations of the business.
A social enterprise can raise capital by attracting investors who are interested in both financial and social returns. A social enterprise can also generate income by selling goods or services that create social value or solve social problems.
Some examples of social enterprises are TOMS Shoes, Warby Parker, Patagonia, and Ben & Jerry’s.
Different Types of Companies in the Plastic Industry
The plastic industry is one of the most diverse and dynamic sectors in the global economy, with a wide range of products and applications. According to Fortune Business Insights, the global plastic market size was valued at USD 579.7 billion in 2020 and is expected to reach USD 783.9 billion by 2028, registering a CAGR of 3.8% from 2021 to 2028 . The product demand is advancing in widespread industries, such as food & beverage, consumer goods, automotive, and electrical & electronics. The increasing demand for packaging material from the food & beverage industry is driving product consumption globally.
The global market is highly fragmented in nature with the presence of major players such as SABIC, BASF SE, Dow Inc., Evonik Industries DuPont, Arkema, and Celanese Corporation as well as a few medium and small regional players operating in different parts of the world . These companies can be classified into eight archetypes based on what they do and how they impact society: Discoverers, Technologists, Experts, Deliverers, Makers, Builders, Fuelers, and Financiers . For example, Discoverers are companies that invest heavily in research and development to create new products and technologies; Technologists are companies that leverage digital platforms and data analytics to enhance their operations and customer experience; Experts are companies that provide specialized services or solutions to niche markets or segments; Deliverers are companies that focus on logistics and distribution of goods and services; Makers are companies that produce standardized or commoditized products at scale; Builders are companies that construct or maintain physical infrastructure or assets; Fuelers are companies that supply energy or raw materials to other industries; and Financiers are companies that provide financial intermediation or capital allocation.
These archetypes can help us understand the similarities and differences between companies in the plastic industry and how they affect households and the environment. For instance, Discoverers and Technologists may have higher innovation potential and positive spillover effects on other sectors, but they may also face higher regulatory uncertainty and social scrutiny. Experts and Deliverers may have higher customer loyalty and retention rates, but they may also face higher competition and price pressure. Makers and Builders may have higher economies of scale and market share, but they may also face higher environmental challenges and social responsibility. Fuelers and Financiers may have higher profitability and cash flow generation, but they may also face higher volatility and systemic risk.
References:
https://aab.al/wp-content/uploads/2017/06/Ligji-per-Shoqerite-Tregtare.pdf
https://isap.sejm.gov.pl/isap.nsf/download.xsp/WDU19820300210/U/D19820210Lj.pdf
https://www.fortunebusinessinsights.com/plastics-market-102176
https://www.grandviewresearch.com/industry-analysis/global-plastics-market
https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/a-new-look-at-how-corporations-impact-the-economy-and-households
https://www.investopedia.com/terms/s/soleproprietorship.asp
https://www.investopedia.com/terms/p/partnership.asp
https://www.investopedia.com/terms/l/llc.asp
https://www.investopedia.com/terms/c/corporation.asp
https://www.investopedia.com/terms/c/cooperative.asp
