The process of transforming businesses into companies is the increase in production capacity, the demand for the product or service produced, and the expectation of profit in return for this effort. People work to create value. Since the first settled communities where trade started, people have tended to expand their business with an entrepreneurial spirit, increasing the capacity and profit margin of the business. The success stories of businesses that have transformed from small workshops to factories, from shops to chain stores, begin with the decision of incorporation and then the story of a rapidly growing company.
What’s a Company?
The company can be founded by one person, two partners, or a group of people and can take many different forms. Company owners are referred to as members or shareholders, depending on the type of company. Due to their legal status, Companies can borrow money, be a party to agreements, and take legal actions such as filing a lawsuit. Corporations are taxed at different rates depending on their type.
It is a legal structure established by one or more persons with the aim of producing goods or services for profit. As a representative, the company may take actions that require an action, such as hiring, firing, selling, or buying shares in other companies. Companies also have the authority to make transactions on the company’s tangible assets, such as borrowing, buying, and selling property.
As legal entities, companies have similar rights and responsibilities to individuals. They may be responsible for human rights violations. They may also use human rights issues against individuals or the state. A company is a legal entity formed by a group of individuals to engage in and operate a business—commercial or industrial—enterprise. These structures also denote the ownership structure of the company. They can also be distinguished between private and public companies.
A company could be a “corporation, partnership, association, joint-stock company or trust. There are many differences, but the following structures are also a kind of companies: non-profit organizations, cooperatives, funds, and organized groups of persons without incorporation.
Definition of a Company
A company is referred to as an association of people who contribute money or money’s worth to a common structure and use it for a purpose. An artificial person who exists as a corporate legal entity is different from its members or shareholders, which has a common authentication utilized for its signature.
Characteristics of a Company
The primary purpose of a company is to take money from investors (their creditors and shareholders) and generate profits on their investments. Creditors and shareholders thus carry different risks with their assets, and they have various return opportunities.
Benefits of Starting a Company
a) Responsibility in Credit and Debt Relations
The main advantage of forming a corporation is the limited liability of its shareholders. The company may have debts, but the shareholders are not responsible for these debts as shareholders. Members of the board of directors are protected from the company’s liabilities unless they continue to trade while the company is insolvent.
b) Tax Discounts Can Be Benefited
Tax deductions cannot be the only reason for establishing a company, but they are essential. For small business owners, it’s possible to get tax breaks by starting a business or expanding its status. You can find out which tax deductions the company to be established can benefit from by meeting with a financial expert or accountant. Depending on the type of company, industry, or state in which the company was founded, there may be support available to you.
Operating expenses make up the routine costs of a business. Expenses such as rent, travel, and communication can be deducted from your company, thanks to tax deductions. For example, a person who works in a home office can remove a part of his rent from tax. If you own a company, you can deduct fuel expenses and travel expenses if the vehicle you drive to and from work is registered with the company. In short, companies can offer more advantageous tax rates than individuals when purchasing goods and services. Purchases made through the company offer benefits such as tax breaks or tax refunds.
c) Financial and Credit Support
Owning a company gives you an advantage when you apply for a loan with a bank. An entrepreneur who has already established his business and wants to expand is more fortunate than an entrepreneur who uses a business start-up plan. On the other hand, trade is a process of accumulation. Many young entrepreneurs start small businesses to finance their big dream projects. As your company makes money and the number of jobs your company does, your credit power will increase with banks and financial institutions.
Your Entrepreneurial Side Strengthens, Your Self-Confidence Increases
Owning a company allows you to be more creative. You have the freedom to implement your own ideas and act with your own decisions. You will determine your products and services. Marketing and sales strategies are also yours. You do not have to work under orders and do business without breaking the existing rules. Having your own company allows you to own risk and success.
d) Transfer to Next Generations
Companies carry the tangible assets of the company as long as the company exists. With the company shares transferred to family companies or family members, it is ensured that the company’s tangible assets and money are transferred to the next generations. In short, the company allows you to transfer all of the company’s assets to your children and grandchildren with a functioning, money-making system.
e) Globalization and International Opportunities
A company is an internationally recognized and respected business structure. It gives a sense of greatness and professionalism in terms of the foreign market as well as the domestic market. Many traders work with foreign companies as brokers, consultants without establishing a company. Establishing a business connection in this way is both more difficult and short-lived. Companies want to have a party that is authorized to sign, that they can make a contract with, and that has legal obligations. If you are going to work with a company in a foreign country, you can get reports about that company from information companies; you can question its credibility from banks. However, if you do not have a company with you, you will not find a bank that can guarantee this information or your trade. The same conditions apply in the opposite case.
Advantages of a Company
Starting a company is the right step to grow your business. To grow a business, you need capital, qualified employees to run the business, and customers to sell your products. If you have a company, you can achieve all this with the right business plan, a brilliant idea, and a successful product line.
- Company shareholders have limited liability.
- You can transfer ownership with the sale of shares
- The company may employ shareholders
- Company may trade anywhere in the USA (taxation may differ)
- Companies can get loans on more favorable terms
- Companies can deduct some of their spending from tax
- They can do business with lower tax rates.
Disadvantages of a Company
If you haven’t started a company, you can’t get a loan from banks to raise your capital, as your enterprise is not official. People will be reluctant to work or partner with you because you won’t be able to offer formal assurance. Finally, without starting a company, you can’t get a high-capacity business; other than small-scale retail sales and marketing your service, the products of an unincorporated seller do not inspire confidence in the customer.
In short, it is difficult to do business without a company, but there are definitely disadvantages to starting a company. Note that these disadvantages apply to unsustainable, unprofitable, unavoidable businesses.
- Establishing, maintaining, and liquidating a company is costly.
- If company directors fail to meet their legal obligations, they can be held liable for the company’s debts.
- Profits distributed to company shareholders are taxable.
- Reporting requirements can be complex.
- Financial transactions of companies are open to the public.
Basic Characteristics of Companies
1. Partnership voluntarily
To establish a company, at least two people must make a partnership decision. The number of partners may be more. That is, to form a private company, at least two people must shake hands. There may be many reasons for becoming a partner in a company, but all partners enter this business of their own free will. A minimum of seven and a maximum of 50 people are required to form a public company. There is no upper limit on the number of partners in publicly traded companies.
2. Company Establishment:
A company emerges on the day it is established/registered. In other words, in order to be able to talk about the existence of the company, the partners must make an official contract and have completed the official procedures after fulfilling the requirements of establishing a company in the state they are in. The main point that distinguishes a company from a group of people doing business with a verbal partnership is establishing the company as a result of official transactions, putting the partners into legal obligations.
3. Company Is The Artificial Person:
The law also sees companies as legal entities whose commercial actions are regulated by law. Companies can trade, borrow money, sue for their receivables, and have the legal authority to do so much like humans.
4. Company as a Separate Entity:
In the face of the law, companies are treated with a different identity, separate from their members. This is what it means. A company is not responsible for the actions of company members. Likewise, the members cannot be held responsible for the company’s actions, debts, and obligations.
5. Continuity of Company Presence:
A company continues to exist unless it is closed for various reasons. The existence of the company is not affected by the status of its members. For example, company members can retire, die, resign. The company’s shares can change hands thousands of times. All these conditions do not terminate the existence of the company. The company continues to exist regardless of the status of its members.
6. Company Seal:
A company that is an artificial person has a seal with the name of the company on it. This seal is considered the signature of the company. The company displays its will through this seal for the documents and contracts to be approved. Documents that do not bear the company seal will be officially deemed invalid.
7. Transfer of Company Shares:
Its members provide the capital of the company. The capital is divided into shares in proportion to the shareholders of the company. In this way, the partnership shares are determined. If a company is public, members can transfer their shares without any supervision or restriction. However, private companies have some restrictions on the transfer of shares.
8. Limited Liability of Company Members
The liability of the members of a company is proportional to the nominal value of the shares they share. In other words, members cannot be put under an obligation that exceeds their shares. Unlike partnership companies, members’ personal assets cannot be used for the collection of company creditors.
9. Scattered Ownership of the Company:
Ownership of a company is dispersed by being divided among many shareholders or partners. According to the provisions of the Companies Act, a private company can have a maximum of fifty members, so the ownership of the company is distributed in proportion to each member’s share. There is no restriction on the number of members or shareholders in public companies.
10. Separation of Company Ownership from Management:
Company shareholders are considered the owners of that company, but they do not have a say in the company’s management. Shareholders are, in a sense, investors, providing capital to the company and making profits as their shares increase in value or as the company distributes revenue. Elected representatives of its members run a company. The elected representatives have a say in the company’s management as members of the ‘Board of Directors.
Types Of Companies In The US
When entrepreneurs decide to start a company. Issues to be considered while determining the type of company come to the fore, such as projections of the company’s costs, tax advantages, establishment costs, personal responsibilities of the shareholders. Although there are various types of companies in the United States, the Corporation and LLC (limited company) types are the most common.
- Sole Proprietorship
- C Corporation
- S Corporation
- Limited Partnership
- Limited Liability Company (LLC)
1) Sole Proprietorship Company (Artisan)
It is the most accessible type of American company to form. The owner of the company is responsible for the entire company. It can carry out all transactions from a single source without having to submit documents or reports to anyone. DBA, short for Doing Business As, stands for a sole proprietorship. In this type of company, all transactions, including incorporation, are easy, but the owner is responsible for all company debts.
2) Corporation Type
Corporation-type companies are legal entities that operate separately from their owners. After the company foundation fees are paid to the state authorities, a corporation can be established after the incorporation document called “articles of incorporation” is prepared and delivered. Corporation type companies are divided into four:
2a) What Is a C-Corporation?
Companies defined as “C-Corporation” in the American tax system are independent of their owners. These types of companies pay their own taxes on their income. No one is allowed to withdraw money from the company, except for allowances such as salary and service fee. The federal government and sometimes state government Corporations are taxed. With the money remaining after tax deductions and other expenses, the company’s capital can be increased, or shares can be distributed to shareholders.
2b) What Is an S-Corporation?
The way S-Corporations are taxed is similar to a partnership. Shareholders can pay taxes by deducting the dividend and salary they will receive from the company. For most shareholders, this is a practical way to avoid double taxation. To become an S-Corporation; There must be less than 100 shareholders; the shareholders must be American citizens or residents.
3) What is an LLC (Limited Company)?
LLC is a type of company unique to the USA that combines the characteristics of partnership and Corporation type companies. The limited liability benefits of corporations and the direct taxation and structural flexibility of partnerships are all available to LLCs. It is the most established type of company in the USA. In LLC-type companies, the founders are not responsible for the business debts or liabilities of the company.
Top 5 Largest Companies In The World
Apple, Amazon, and Microsoft, apart from their place in the ranking of the world’s most valuable and highest-paid companies, are also leading the world’s most valuable brands. These companies are at the top of the rankings due to their income levels but are also leading companies in terms of brand values.
Apple Inc. is a technology company that produces software for use in computers, smartphones, smartwatches, consumer electronics, and computers and smartphones. The news that Apple has started working to create autonomous electric cars will add competition to the automotive industry as a technology company, and the Apple company will likely be in the next ten years. It will grow exponentially.
Microsoft is the manufacturer of software and services such as search engine (Bing), cloud solutions and computer operating system Windows, and the operating system and office software most used by PC users. Microsoft could not establish its dominance in PCs on smart devices. Android and ios operating systems are at the forefront in smartphones, tablets, and televisions. Microsoft has come to the forefront with its cloud solutions in recent years.
Amazon is the most innovative company ever. Saying hello to commercial life with its online book store, the company today has the world’s largest B2C and B2B platforms and many initiatives in the software sector and on the internet. Amazon company working on innovative products such as cashless markets, autonomous cars, and drone shipping. The company is also designing rockets to be sent into space with another subsidiary. Blue Origin is a private spaceflight company owned by Amazon.com Inc.
Facebook Inc. A social media giant based in California. Facebook is the pioneer of social media. It increased its power in social media by taking over the video and photo sharing application Instagram and later the world’s most used messaging program WhatsApp. Facebook has investments in different areas than social media. For example, the virtual reality hardware manufacturer Oculus VR is a Facebook subsidiary.
Tesla, Inc. takes its name from the inventor Nicolai Tesla, who is known for his contributions to the alternating current electricity supply system. Tesla is one of the world’s largest electric car manufacturers. The company manufactures electric cars, as well as power storage and photovoltaic systems. Tesla brought a breath of fresh air to the automotive industry dominated by fossil fuel consumption with its electric-powered, zero carbon emission cars. The company is known for its policies that support the transition to sustainable energy.