Difference Between Company and Firm

Company vs Firm

The words company and firm are used interchangeably by people and they talk of these entities in the same breath. It is common for people to talk about an accounting company as an accounting firm, or a consultancy service company as a consulting firm. But are these terms equivalent or is there any difference between these two terms? This article will explain the features of the entities called firm and company to see if they are same or have significant differences.

As far as dictionary is concerned, the Longman dictionary says that a firm is usually a small company. If one goes by this definition, a firm is a type of company and the term is in effect a subset of the generic term company. In practice, a company could be a firm. A firm, irrespective of its size or area of operation is a business entity just like a company. Usually, the word firm is reserved for businesses providing services as is clear with the use of terms like accounting firms and consulting firms. However, there is no restriction on the usage of the word firm to be used with any company manufacturing products. There is certain charm about the word firm that makes people adopt it to signify the business they are carrying. Somehow, the word connotes professionalism and secrecy that is not reflected by the word company.

In modern times, the use of the word firm has become outdated and is restricted to legal, consultancy, and accountancy businesses. For all other businesses, the word company is being preferred. Even in the professions mentioned, there are more and more people who today prefer the use of the word company against their names instead of firm. Firms are generally proprietorship or a partnership firm whereas a company has been registered and has shareholders.

Company vs Firm

• A firm and a company are not separate entities

• A firm is a type of a company.

• The word firm was traditionally used for accounting and consulting companies and they are even today referred to as firms.

• Firms are either sole proprietorship or partnership whereas company is registered and has shareholders.