Commercial Companies – Features Types and Examples
Commercial Companies – A commercial company is mainly dedicated to purchasing goods to sell them without transforming the raw material.
Commercial companies are dedicated to buying goods to sell them without transforming them. However in a broad sense, these companies carry out organized economic activities, such as purchasing and selling products that may well be raw materials or finished products.
In turn, these companies fulfil the function of intermediaries between producers and consumers and do not transform raw materials. In this regard, it is necessary to recollect that a commercial companies does not have to be only of this category since there are joint ventures, which can be commercial, industrial or services.
Such is the case of companies that buy and sell household appliances, thus placing themselves in the commercial category and providing repair and maintenance services for the products sold, making them service companies.
These companies can be public or private. An example of a public, commercial company is Ecopetrol (this company is also an industrial company since it processes raw materials to manufacture fuels). An example of a private commercial companies is a chain store.
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The main characteristics of this type of company are:
- The purchase and sale of goods.
- The buyer can be the consumer or another company.
- And more they do not transform the goods they buy. They only take care of their sale.
- They can be public or private.
- Therefore they become commercial intermediaries.
Types of Business Enterprises
Commercial companies are classified according to certain factors:
- Because of the volume of operations, which makes them wholesale or retail.
- Depending on the product they use for their work, such as raw materials, semi-finished products or finished products.
Some examples of Commercial Companies
- A company that buys flowers in large quantities and sells them without processing (wholesale trading company).
- A company that buys motor vehicle parts in small quantities and sells them to garages of a particular brand (retail trading company dealing in semi-finished products).
- A chain store that buys products of all kinds in bulk, such as household products, food, and appliances (a wholesale trading company that deals in finished goods).
Limited Liability Companies – Commercial Companies
A distinction should be made between limited liability companies of several partners and those of a single partner.
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The limited liability company (SARL)
The LLC comprises at least two partners, who do not have the trader status and are only liable within the limit of their contributions, and a maximum of one hundred. There is no minimum share capital to be a symbolic euro. The liability of the partners is limited to their contributions. On the other hand, in a bank loan by SARL, the bank will systematically ask the partners or the manager/s to stand surety.
The SARL is subject in principle to corporation tax, unless it is a so-called “family” SARL, under the terms of Article 8, 3° of the General Tax Code.
The partners must appoint one or more managers, who must be natural persons who do not have trader status. The social regime of the SARL manager differs depending on whether he is a majority or minority shareholder, under the terms of article L311-3 of the Social Security Code. If the manager is a minority, egalitarian or non-associated, he benefits from all the advantages of the general social security system. Conversely, most managers come under the scheme for self-employed workers, affiliated with the social security of the self-employed.
Interests and Disadvantages
The SARL makes it possible to protect the personal assets of the partners. There is an actual social screen between the help of the partners and the activity carried out. It is also possible for the manager to combine an employment contract with his corporate office. If this corresponds to an actual job, it is reimbursed and places the manager in a state of subordination about a company. As a result, this accumulation does not permit majority shareholder managers. On the other hand, the social system of the majority manager, who must affiliate to the social security system for the self-employed, can discourage some people from creating this type of company and direct them instead towards a simplified joint-stock company.
The single-member limited liability company (SARLU or EURL)
The EURL follows most of the rules of the limited liability company. Only it is composed of a single partner. The sole shareholder can be a natural or legal person.
A single partner forms the EURL. If the sole shareholder is a natural person, the company is fiscally transparent. Therefore, the profits are in principle subject to income tax in the hands of the sole shareholder, under the terms of article 8, 4° of the General Tax Code.
Interests and Disadvantages
The EURL allows a single partner to exercise his activity as a company rather than exercising it in the form of a micro-enterprise or sole proprietorship. As a result, it can transmit his company more efficiently and secure his assets. On the other hand, the creditors will often ask for a personal guarantee from the partner. In addition, the operation of the EURL will be more restrictive, particularly in terms of formalities.
Joint Stock Companies The public limited company (SA)
The public limited company exists as a capital company. And it defines under the terms of article L225-1 of the Commercial Code :
The public limited company is the company whose capital is divided into shares. Which constitutes between partners who only bear the losses up to their contributions.
It forms between two or more partners. However, the number of partners may not be less than seven for companies whose shares admit to trading on a regulated market or a multilateral trading facility.
The minimum share capital to constitute it is 37,000 euros. It must be made up of at least two unlisted companies and seven shareholders for listed ones.
Two organizational systems can provide for a board of directors and a general manager (possibly assisted by deputy general managers) in an SA or a supervisory board and a management board. In addition, the appointment of an auditor is mandatory in this type of structure.
Commercial Companies – Advantages and Disadvantages
The public limited company (SA) remains a company suitable for an activity that will generate significant profits. Indeed, the costs of incorporation and operation are high, and the formalities are cumbersome.
Simplified joint-stock companies (SAS)
The regulation of the simplified joint-stock company defines under the terms of articles L227-1 and the following of the Commercial Code:
A simplified joint-stock company can stay set up by one or more persons who bear the losses only to their involvement. When this company has one person, this person refers to as the “sole shareholder”. The sole shareholder exercises the powers devolved to the shareholders when this chapter provides collective decision-making.
The SAS is a very flexible company; the partners can conventionally organize their rights and obligations by signing a partner’s pact. Unlike public limited companies, the simplified joint-stock company can be created with a minimum share capital of one symbolic euro. SAS partners only bear losses up to the amount of their contribution.
Commercial Companies – Characteristics
The main characteristics of the SAS reside in the freedom of partners to organize its operation (the contractual freedom of the partners expressed in the statutes). As well as the possibility of creating a simplified joint-stock company by a single shareholder ( SASU ).
Commercial Companies- Interests and disadvantages
The main interest of the SAS is the flexibility of the social form and the possibility of conventionally determining the functioning of the company. However, be careful. And this flexibility requires in return to be rigorous in the drafting of the articles of association and the shareholders’ agreement.
The social regime of the president can also be an advantage. Indeed although the contributions are a little higher. The latter affiliate with the general social security regime since he assimilates as an employee. As in the SARL, the accumulation with an employment contract is possible if the president is not a majority shareholder of the SAS.
Finally, the appointment of an auditor has become a simple option offered to shareholders. Except in the event of crossing certain thresholds set by decree, which reduces the company’s operating cost.
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