Business vs Company
Though the terms business and company are used invariably in many places, there is some difference between them. This difference has to be understood carefully. If you are engaged in an activity that earns you money on a continuous basis, you are said to be doing a business. Whether you are running a retail shop or a wholesaler, whether you are a lawyer or a sportsperson, as long as you are making money out of your activity, and it is your career or profession, you are doing a business by selling goods or services. It does not matter whether you have registered yourself as a company or any other legal entity to have a legal sanctity for your business. Company, on the other hand, is a separate entity where you do your business. This is the basic explanation of the difference between a business and a company. Indeed, there are many differences between business and company that will be explained in this article.
What is a Business?
Business is any commercial activity that earns you money when you provide goods or services. The most notable difference, whether you are running a business or heading a company, pertains to the way the entity has been structured financially and according to the provisions of law. It is less troublesome to launch a business than get it registered as a company, and this is precisely the why most of the entrepreneurs start up as just businesses, and not as companies. If you are running a business and have taken debts from several creditors, you are liable for the entire loan taken. So, if there are any losses in the business and you are not able to pay back your creditors, creditors are well within their right to get back their money by selling your possessions. It is alright to keep on running a business, and not wanting to convert it into a company. In fact, there are quite a number of businesses across the world that operate this way alone. These businesses have a desire to become more profitable, but they do not look to rule the world or become a big company. However, it is not feasible to keep running as a business once you have grown to a certain size, and this is when you need the protection of limited liability by incorporating into a company. As long as you can make that decision of turning your business to a company when the right time comes, you can continue as a business.
What is a Company?
When you establish your business as a firm according to the laws of the country, it becomes a company. Company is more large scale than a business. Setting up a company is a costly affair. However, it is possible to structure it legally in such a manner that it will be seen as a separate entity than its owner. This is one point, which assumes significance when business suffers losses, or something else goes wrong. When it comes to debts, company has an advantage. When you have got the business registered as a company, you have a limited liability. As a result, in the case of losses and when you are not able to pay back the loans, debt remains the responsibility of the company, and creditors cannot touch your private possessions like your home or car. Also, if you are hoping to expand your business to more areas and become a big player then being a company is the best option.
What is the difference between Business and Company?
• Operating as a business has the benefit of low start up cost as you need to register your company in the states where your business has the presence.
• On the other hand, starting as a company can be quite costly and time consuming.
• Companies can have shareholders, and this means they can raise capital easily.
• However, there are more governmental regulations to face as a company than as a business.
• You are valued as a serious player once you are a registered company, and businesses are more comfortable in dealing with you. Business is the choice if you do not have a desire to become a big player.
• The taxes you have to pay as a company is higher than what you have to pay as a business.
• In a business, you as the owner have to pay taxes. In a company, it is the company that pays the taxes, not the owner.
As you can see, both business and company have their advantages to offer. So, study both options carefully and choose the one that suits you.
Images Courtesy:
- Business via Pixabay (Public Domain)
- Company building by M.O. Stevens (CC BY 3.0)
