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Sep 19, 2022 · In this article, the author discusses how a successful organization today moves from mass markets to markets of one, routinely replaces core competencies, shifts to team-based structures, and ...
- Overview
- Types of business associations
Also known as: business enterprise, business firm, commercial enterprise, enterprise
Written byS. Nicholas Woodward
S. Nicholas Woodward
Fellow, Templeton College—the Oxford Centre for Management Studies, University of Oxford. Coauthor of Finance for Managers.
Fact-checked byThe Editors of Encyclopaedia Britannica
The Editors of Encyclopaedia Britannica
Business associations have three distinct characteristics: (1) they have more than one member (at least when they are formed); (2) they have assets that are legally distinct from the private assets of the members; and (3) they have a formal system of management, which may or may not include members of the association.
The first feature, plurality of membership, distinguishes the business association from the business owned by one individual; the latter does not need to be regulated internally by law, because the single owner totally controls the assets. Because the single owner is personally liable for debts and obligations incurred in connection with the business, no special rules are needed to protect its creditors beyond the ordinary provisions of bankruptcy law.
The second feature, the possession of distinct assets (or a distinct patrimony), is required for two purposes: (1) to delimit the assets to which creditors of the association can resort to satisfy their claims (though in the case of some associations, such as the partnership, they can also compel the members to make good any deficiency) and (2) to make clear what assets the managers of the association may use to carry on business. The assets of an association are contributed directly or indirectly by its members—directly if a member transfers a personally owned business or property or investments to the association in return for a share in its capital, indirectly if a member’s share of capital is paid in cash and the association then uses that contribution and like contributions in cash made by other members to purchase a business, property, or investments.
The third essential feature, a system of management, varies greatly. In a simple form of business association the members who provide the assets are entitled to participate in the management unless otherwise agreed. In the more complex form of association, such as the company or corporation of the Anglo-American common-law countries, members have no immediate right to participate in the management of the association’s affairs; they are, however, legally entitled to appoint and dismiss the managers (known also as directors, presidents, or administrators), and their consent is legally required (if only pro forma) for major changes in the company’s structure or activities, such as reorganizations of its capital and mergers with other associations. The role of a member of a company or corporation is basically passive; a member is known as a shareholder or stockholder, the emphasis being placed on the individual’s investment function. The managers of a business association, however, do not in law comprise all of the persons who exercise discretion or make decisions. Even the senior executives of large corporations or companies may be merely employees, and, like manual or clerical workers, their legal relationship with the corporation is of no significance in considering the law governing the corporation. Whether an executive is a director, president, or administrator (an element in the company or corporation’s legal structure) depends on purely formal considerations; whether the executive is named as such in the document constituting the corporation or is subsequently appointed or elected to hold such an office, the person’s actual functions in running the corporation’s business and the amount of power or influence wielded are irrelevant. Nevertheless, for certain purposes, such as liability for defrauding creditors in English law and liability for deficiencies of assets in bankruptcy in French law, people who act as directors and participate in the management of the company’s affairs are treated as such even though they have not been formally appointed.
Definition of the company by Lord Justice Lindley is, “A company is a voluntary organization of many persons who contribute money or money’s worth to common stock and employs it in some trade or business and who share the profit or loss arising, therefore.”
May 29, 2024 · The organizational structure is how the company delegates roles, responsibilities, job functions, accountability and decision-making authority. The organizational structure often shows the...
- Christine Organ
Feb 25, 2024 · An organizational structure organizes a company’s activities. Explore four types of organizational structures: functional, divisional, flatarchy, and matrix.
- Will Kenton
Nov 21, 2023 · The simple definition of business, or business meaning, is explained as an organization that provides goods and services to the community in exchange for money, with the goal of becoming...
Sep 2, 2023 · A company is a business organization that produces and sells goods or services to make a profit. Its key characteristics are a separate legal entity, perpetual succession,...
