Modern life encourages people to strive for their own business. But working alone is not as profitable and promising as working together. Therefore, like-minded people unite in organizations to do business together. Moreover, not only individual businessmen, but also entire economic entities unite for mutually beneficial work.
A commercial organization is a legal entity with characteristic features, the main goal of which is to earn profit. The main feature of such an organization is precisely the purpose of the work - to make a profit. Although there are other features inherent in different forms of commercial structures, which will be discussed in detail in this article.
Common features of commercial organizations
All private firms, regardless of their form, have common characteristics:
- obtaining benefits, that is, income that exceeds expenses;
— a general system of creation in accordance with current laws, since a commercial organization is precisely a legal entity with all the ensuing rules;
— profits are always divided among those who own the organization;
— the presence of common property with which the company is liable for its obligations according to the law;
— the opportunity on one’s own behalf to exercise one’s rights, obligations, and represent interests in judicial authorities;
- financial independence.
Finance of commercial organizations
As part of the creation of enterprise funds, finances are created and formed, which are based on the enterprise’s own resources, as well as attracting funds from outside, that is, investments. As a rule, the finances of each organization are closely related to cash flow. It is generally accepted that the economic independence of each commercial enterprise is impossible without the implementation of the same type of characteristics in the field of finance. Thus, regardless of other entities, each business entity determines its expenses and sources of financing in accordance with current legislation.
Forms of commercial organizations
The form of further organization is chosen depending on what tasks the ideological inspirer of the creation of a private company sets for himself. Features of economic development and the formation of civic consciousness contributed to the emergence of many different forms of commercial organizations. They are grouped into appropriate groups according to certain characteristics. And these groups, in turn, are also divided into subgroups.
Probably, many of us very often came across such definitions as LLC, OJSC, JSC, etc., as well as partnerships, production cooperatives, farms, unitary enterprises, and so on. Each group has a specific set of rights and responsibilities and directly depends on their industry affiliation.
The meaning of a commercial organization
A commercial organization is a legal entity that pursues making a profit as the main goal of its activities, in contrast to a non-profit organization that does not aim to make a profit and does not distribute the profits between participants
The main features of a commercial organization The purpose of activity is to make a profit; A clearly defined organizational and legal form in the law; Distribution of profits between participants of a legal entity. Also, commercial organizations have all the characteristics inherent in a legal entity:
They have separate property in ownership, economic management or operational management, and other property rights; property can be leased; Fulfill their obligations with property owned by them; Acquire and exercise on their own behalf property and non-property rights; bear responsibilities; May be a plaintiff and defendant in court. Article 50 of the Civil Code of the Russian Federation provides an exhaustive list of organizational and legal forms of commercial organizations. This means that without changing the Civil Code, no other laws of other commercial organizations can be put into circulation.
Rights are inseparable from responsibilities
So, a commercial organization is a structure that unites both individual people (founders) and business structures. According to organizational and legal characteristics, all commercial firms can be divided into two large groups:
— unitary enterprises (municipal or state subordination);
- corporations.
The first group is less common. It should be noted that the rights of commercial organizations of this type are very limited. This legal entity cannot dispose of property transferred to it from the owners. And the owners, in turn, do not have corporate powers to interfere in the management of the structure. Concepts such as shares, shares, deposits are not applicable at all in this case. That is, the appointed director or general manager manages the enterprise using someone else's property. And the owners themselves can count on a certain profit. But they do not make any production decisions and in no way can influence the results of the unitary enterprise’s activities.
The second option is more common. It is characterized by the presence of founders who have the corporate right to manage the company.
Accepted classification of activities
All commercial entities can be divided into two conditional groups . The first group includes corporations managed by founders and members of the management team who have corporate rights. It is important to note that this group includes several subgroups. Such subgroups include farms, partnerships and production societies.
The second group includes all municipal and state companies. A distinctive feature of these business entities is the lack of ownership rights to assets received from the business owner. This means that the management level does not have corporate rights to manage the company.
As a rule, such organizations are created under close government control.
Corporations in different types
So, corporations involve such management of a commercial organization when the founders are endowed with broad rights and even belong to the highest management bodies of the enterprise. Corporations are divided into three main structures:
— business companies and partnerships;
- cooperatives (exclusively production and no other);
- farms (they are also called peasant farms).
Economic societies can also be completely different. Although they have one common feature - they combine the capital of several persons who are jointly responsible for the work of the company. Previously, there were many types of business entities. But legislators decided to combine them under three general forms. Today these are LLC (limited opportunity company), JSC (joint stock company) and additional liability company.
Types of commercial organizations
The types of legal entities working for the purpose of making money are listed in Article 50 of the Civil Code. According to this regulatory act in modern Russia, commercial organizations are:
- OOO;
- JSC (joint stock companies);
- Municipal unitary enterprises and state unitary enterprises;
- peasant farm;
- production cooperatives;
- partnerships;
- general partnerships.
All types of commercial organizations are fixed and limited by law. Simply put, any legal entity planning to earn money has the right to choose any of the forms you have named, but does not have the right to establish or try to register any other form. Each type of CO has characteristic features, for example, the composition of participants, powers and responsibilities, scope of activity, property rights.
The most common form of doing business in LLC is a commercial or non-profit organization? This name is present in the above list, which means the answer is clear - yes, commercial. The goal of any LLC is profit. They work in all areas of activity. The founders/owners of such a legal entity own the company's property either by ownership or lease. Profit is distributed among the founders according to their share in the authorized capital of the LLC. In case of bankruptcy of the company, the founders are bound by subsidiary liability.
In -stock company, the authorized capital is divided into a certain number of shares. Unlike founders of limited liability companies, shareholders do not risk the property or assets of the company, but only the shares. If the company goes bankrupt, they will only lose the securities, or more precisely, the amount that they could have gained by selling them at the peak of their value.
Scheme of commercial organizations (currently the activities of additional liability companies have been stopped)
Municipal and state enterprises also work for the sake of income. But they are distinguished by the lack of ownership rights to real estate and means of production. Most of these enterprises are located in buildings owned by the municipality or region. While operating, municipal unitary enterprises and state unitary enterprises must earn money and simultaneously solve social problems. For example, to provide the population with transport, essential goods, and food. In practice, most of these enterprises are unprofitable and exist due to subsidies from the budget.
A commercial company operating as a peasant farm is distinguished by a specialized branch of activity. LLCs or municipal unitary enterprises can operate in any industry, but peasant farms can operate only in agriculture (as the name directly implies). Participants in a peasant farm jointly own property, and the association is headed not by a director, but by an individual entrepreneur-farmer. Federal Law No. 74-FZ is dedicated to this type of legal entity.
A production cooperative is similar to an LLC with the only significant difference. The founders of a production cooperative act as both owners and employees. Personal work in the cooperative is mandatory for each owner. Production cooperatives are not authorized to employ employees, but have the right to work in any industry. Guided by federal law No. 41-FZ.
Business partnerships are rare. This is a type of commercial association that is established by at least 2 persons. Management, powers and terms of the partnership are fixed by agreement. Such partnerships are very limited: the law prohibits them from establishing other legal entities, issuing bonds, or even advertising.
General partnerships are also a “dying” species. Members of such an association can be individual entrepreneurs and legal entities; there must be at least 2 of them (as is obvious from the name). They operate on the basis of a constituent agreement, and receive profits in accordance with their share in the share capital. If the partnership goes bankrupt, the members bear joint and several liability and are liable with personal property.
The goal of any commercial organization is profit
What is the difference between LLC and JSC
When a commercial organization is an LLC, then everyone who is part of it as owners has a share of the authorized capital formed from the contributions of the founders. All limited liability companies have common features:
— the amount of authorized capital starts from 10 thousand rubles;
— the responsibility of each founder is proportional to the size of his contribution to the main charter;
— the number of participants cannot be more than 50;
— the rights and obligations of participants are prescribed in the corporate agreement and the charter.
And when the authorized capital is divided into shares, the participants are responsible for losses only in the amount of the shares they have, then there can be any number of such members of the enterprise. And they are called shareholders. This is the main difference between JSCs (joint stock companies). Such a commercial structure can be public or non-public. That is, shares are placed using an open or closed method. And the form of management is the meeting of shareholders. It is mandatory to create a board of directors consisting of at least 5 shareholders. In an LLC, it is not necessary to create such a structure, and there is no strict rule on the number of participants in the structure.
Economic partnership and production cooperatives
A commercial organization is a structure, as we have already said, that unites like-minded people with the common goal of making a profit. If we are talking about a business partnership, then two forms of such a structure are allowed - a general partnership and a limited partnership. The second formation is distinguished only by the fact that some members of the organization - individuals, do not have the right to participate in the management of the organization, but are only investors. They simply receive a profit from the deposit for replenishing the pooled capital with their own funds.
Production cooperatives are not popular. With this type of commercial association, management must be carried out by all participants, moreover, in a composition exceeding five members of the organization. They are personally responsible for their own property and for the debts of their company.
Agricultural business sectors
The name speaks for itself that the field of activity of such an organization as a peasant farm is the rural industry. A farm enterprise can be created either by one owner alone or by uniting with others.
Moreover, he cannot afford to join a number of such associations. Characteristic features of this form of commercial structure:
- all participants must directly participate in the affairs of the company;
— farmers can directly be members of this structure;
— there are other responsibilities of each farmer, prescribed and enshrined in the charter;
- the company acquires its material assets, equipment and consumables with the joint money of each member of the farm.
State commercial organization
The state also has the right to engage in commerce, benefiting from its work. We are talking about a unitary enterprise. This type of commercial organization is a structure that is very limited in its rights to property. Because he does not own his own equipment and premises, but only uses it all for work. A unitary enterprise allows for both municipal and state subordination, but has common characteristics. Let's list them:
- has a certain legal capacity;
- uses someone else's property only as a tenant;
— participates in civil circulation.
A unitary enterprise is headed by a director or general director. It is he who is responsible for all decisions as the sole leader. Collective leadership does not exist in this form.
“Commercial organization” - the essence of the concept
Legal entities engaged in economic activities for the purpose of generating revenue are classified as commercial entities. According to the established procedure, this classification includes various societies, municipal and state companies, production cooperatives and partnerships. It should also be noted that regulatory authorities allow the creation of commercial entities to merge with other organizations. Such mergers are called unions and associations of legal entities.
Each business entity owns various assets . Such assets include both property and financial assets. It should be noted that property assets can be either owned by the company or used as a lease. The assets of a legal entity are used to meet existing financial and debt obligations. According to established rules, such companies have the right to use only those assets owned by the organization to cover debt obligations. Members of the management of such a structure have the legal right to develop their company in order to increase profits.
All profits received are distributed according to the level of investment of each member.
Commercial organization - what is it? Before you begin to study this issue, you should familiarize yourself with the meaning of this structure. As mentioned above, the category of commerce includes persons who receive regular profits from their activities. Based on this, it can be assumed that the main goal of such companies is to organize economic activities in order to extract financial resources . The funds received are distributed among the participants of a particular structure, according to the level of their investments. It should be mentioned that current laws have a clear description of the organizational and legal form of such structures.
The fiftieth article of the Civil Code of the Russian Federation provides a number of criteria that determine the organizational and legal forms of entities belonging to the category of commerce. This means that in order to introduce new types of commercial structures, regulatory authorities need to make adjustments to the above-mentioned legislative act.
The main classification of commercial organizations is by type of organizational and legal forms
Commercial subsidiaries
There are also commercial legal organizations such as “subsidiaries”. A subsidiary business company is not responsible for the debts of the parent company, but is jointly and severally liable for all those transactions that are entrusted to it. And the main enterprise has the right to assign tasks to its “subsidiaries”, drawing up tasks for the future and current plans. The relationship between this dominant structure and its subsidiaries is reflected in the relevant documents, which spell out the rights and obligations of the parties. There is also such a thing as a dependent economic company. It depends on another organization having:
— no less than 20 percent of voting shares;
— 20% of the authorized capital of a limited liability company.
And if an enterprise acquired 20 percent of voting shares or began to own 20% of the authorized capital, according to the law it must publish this information.
Which is better – individual entrepreneur or LLC?
For those who want to create their own business, many books have been written, lectures and seminars are held. But a frequent question was and remains: what exactly to open - an individual entrepreneur (individual entrepreneurship) or an LLC? It is no coincidence that some people choose the first option. Because opening an individual entrepreneur does not require a lot of time and large financial investments. Moreover, for beginners it is important that fines and taxes are small. Because no one is immune from mistakes and low profitability. And reporting for individual entrepreneurs is much simpler. In addition, managing your own money is easy and pleasant. There are also disadvantages, including:
— the risk of losing the property of an individual entrepreneur due to unfulfilled obligations;
— types of activities of individual entrepreneurs are limited;
— it is necessary to deduct a percentage to the Pension Fund.
An LLC has other pros and cons. Among the advantages is that there is no risk of losing money and property if you are just one of the founders, because the organization itself, and not an individual, is responsible for debts. Another plus is that the capabilities of such a reputable organization are much wider. The LLC can even be sold as unnecessary. And the LLC does not pay contributions to the Pension Fund if for some reason it suspends its activities. And the cons:
— a more complex and lengthy registration procedure;
— strict requirements for authorized capital;
— special rules for withdrawing earned funds;
— complex financial reporting;
- high fines.
As is the form, so are the finances
Each commercial company creates a set of financial relations that allow solving social and production issues through the use of its own funds. The finances of commercial organizations depend on their legal form. For example, the state form is largely dependent on the injection of budgetary funds. Many unitary enterprises receive government subsidies, thus minimizing the risk of bankruptcy. While non-state owned organizations rely more on their own strength.
Their budget is formed, as a rule, thanks to the investments of the founders. However, commercial and non-profit organizations can count on budget injections. Although now is the time when state-owned unitary enterprises are increasingly relying on other sources of financing, as budget injections are being reduced. The state thus encourages enterprises to think more about the effective use of their own capabilities, finding new sources of income, and cutting costs. Such sources can be interest and dividends on securities, income from transactions with currency and foreign exchange values, expansion of the service sector, and the introduction of competitive ideas.
Signs of a commercial organization
The legislation of the Russian Federation divides all associations into commercial and non-profit (NPOs). A commercial company is a structure whose goal is the systematic extraction of monetary income in a chosen area (production, trade or services). The list of areas in which such companies deal is very wide and in fact not limited.
Commercial organizations are created to make money. It is money that is the main motive of their activities, and all other tasks are subordinated to it - market leadership, creating jobs and attracting employees, advertising and promotion on the Internet. Such enterprises pursue commercial goals - systematically increasing profits with an increase in the rate of income growth.
The most convenient way to find out whether a company is commercial is to find out its legal form. Their list is approved by Article 50 of the Civil Code of the Russian Federation (we will consider it in more detail in the next section). But there are some other signs:
- own land, real estate, equipment, materials or raw materials by ownership or lease;
- pay for financial obligations with this property - in case of bankruptcy, the property is sold at auction;
- can act in court as a defendant or plaintiff;
- participants receive profit in proportion to their contribution to the capital of the association or means of production;
- pay taxes according to the rules of the chosen tax regime, and also act as tax agents for their employees.
So, a commercial structure is aimed at systematically making a profit in a chosen field of activity. Therefore, it registers in accordance with the procedure established by law, operates in the market and tries to lead among competitors, hires employees, provides them with salaries and acts as a tax agent for them.
The list of types of commercial organizations is approved by the Civil Code
Financial features by industry
The financial position of firms is to a large extent influenced by industry affiliation. For example, financial commercial organizations, as industries with great financial risk, are required to have a sufficient financial foundation, additional cash reserves, and insurance. We are talking about credit institutions and insurance companies. Commercial firms with low profitability are considered to be agricultural and, oddly enough, utility and resource supply enterprises. Therefore, the law limits the ability of these firms to supplement their funding sources by issuing securities. Legislators also require increased rates for social insurance against industrial accidents and occupational diseases from those industries in which there is an increased risk of occupational “sores” and injuries - coal mining, gas, chemical and oil industries. Even the scale of the commercial firm itself is influenced by industry factors.
When organizing commercial activities, it is necessary to take into account that large-scale enterprises include mechanical engineering, shipbuilding and ship repair, metallurgical plants, in a word, almost all heavy industry. And trade and consumer services are carried out through small and medium-sized businesses, often not requiring a large scale. That is, depending on the specific industry, requirements are formed for the organizational and legal form of a commercial structure and, accordingly, for its financial mechanism.
