Firm vs Company
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Firm or company
In casual, everyday conversations, people often use the terms firm and company interchangeably. Businesses that call themselves a firm or a company may pique the interest of consumers or the general public, but more often than not, it is overlooked. Not all people know that the definitions of those terms are actually quite different, and the difference would largely lie on the legality of a business, entity, or an organisation.
Company
For instance, the definition of a company is solely about its legal basis. Only an organisation that is registered as a company may in fact be acknowledged as a company. There are different types of companies as well, and the most common would be the public limited company (PLC) and the private company. The former is called public because their stocks may be available for trade, and these are usually large organisations who can afford to have their stocks available for the public. As for the former, the stocks are usually not traded, hence the term “private”. To know if companies are private, the appendage “Ltd” is usually included.
Firms
Firms are less complicated than the term “company”. Companies may actually be called firms, which is probably why people call companies firms even though the companies are already registered companies. That is perfectly acceptable in casual, informal conversations. However, in a formal setting, calling an organisation a firm is only legally correct if that organisation is not a registered company. Firms, or businesses that are not registered and can’t be called a “company, have two types: sole proprietorship or partnerships. Sole proprietorship means the business is owned by one person, while partnerships, as the name suggests, are equally or partly owned by more than one individual.
What are the differences between them?
What makes the two terms more complicated is that the requirements to, for instance, register as a company or create a firm will differ per country. This will depend on the country’s legal code, tax code, and other policies that are relevant and necessary to registering a company and building a firm. Aside from the legal requirements of countries and even states, as is the case in the United States, another elements that strengthen the difference between the terms “company” and “firm” would lie on the liabilities of the members. However, the important difference would really be dependent on whether or not the business is registered or not.
Although the public may have access to records of companies that trade through the stock exchange, information on whether or not a business is registered as a company may be highly overlooked. Not all people are interested with this type of information, and those who are interested may be curious for business and legal purposes i.e. if they actually want to trade or buy stocks. As such, the terms firm and company are loosely used to mean any type of business. As mentioned, this is acceptable in conversations that are not legally-binding or business-oriented. Otherwise, using those two terms interchangeably in legally charged conversations or documents may only lead to complications and problems.