In life, many come across various terms, for example, related to law or economics. This is a common trend, because we are surrounded by thousands of shops, enterprises, cafes, shopping centers and other places that can be called a business. The scale and speed are different, but there are not so many classifications on paper. It is unlikely that someone will ask you: "What is the difference between JSC and ZAO", but it is simply useful to know, but it may even be necessary for someone.
What is the legal form
In legal language, this is a statutory way to manage a business entity. To put it more simply, these are the names of the types of various legal entities and individuals conducting various activities. Most often, this refers to various businesses, but the classification of forms also includes types of non-profit activities, for example, political parties, cooperatives and other legal entities. Well-known forms are suitable for business: LLC, OJSC, ZAO, IP. There will still be differences, and significant ones and they will be discussed in more detail.
What is it for
It is possible that many people think that such subtleties as, for example, the difference between a closed joint-stock company and an open joint-stock company, complicate life, however, if you look into all this, it becomes easy to understand that the legal forms are necessary to streamline various activities in a market economy. First of all, this is connected with labor protection, taxation, consumer protection, so that entrepreneurship is carried out legally, without various violations. In addition, the forms fix the property rights, duties and responsibilities of the founders of a legal entity.
The main legal forms in entrepreneurship
Everyone knows such types of enterprises as:
- individual entrepreneur (IP) ;
- limited liability company (LLC);
- Closed Joint-Stock Company (CJSC) ;
- open joint stock company (OJSC)
Each form from the classification has its own goals and objectives, for example, it allows an individual to legally engage in business or issue their shares in circulation to large firms.
Individual entrepreneur
This status allows an individual to do business. The founder can be only one person. This explains the fact that IP does not require the formation of a legal entity. However, there are some nuances, for example, that a citizen will answer with his own property in case of any lawsuits. A positive factor will be that for entrepreneurs there is a simplified taxation system where VAT is not required. This form is well suited for small businesses: shops, beauty salons, car washes, etc. However, it will not be possible to open a restaurant, since in order to obtain a license for alcoholic beverages you need to register a legal entity, for example, a limited liability company.
Public corporation
The essence of this legal entity is that it can issue its shares on the market, the number of which may be unlimited, this is the main difference between OJSC and CJSC. In addition, such enterprises are managed collectively. This role is assigned to the general meeting of shareholders, which performs its functions in accordance with the charter of the organization, as well as the legislation of the Russian Federation. Despite this, operational management can be carried out by one sole director. It is important to know that OJSC is a common obsolete name, since since 2014 such companies have been called public joint-stock companies, abbreviated as "PJSC". Despite this, many use the established classification.
Closed Joint Stock Company
The main difference between CJSC and OJSC is that such an enterprise cannot issue shares for free sale. Securities can only be held by a narrow circle of persons, founders of the enterprise. Another difference between a closed joint stock company and an open joint stock company is that the number of shareholders cannot exceed fifty people. In general, enterprises of this kind are more closed due to their legal form, but this is expressed only in working with securities, which causes difficulties in raising funds, since the issue of shares is possible only within the company. Also, the difference between a closed joint stock company and a joint stock company is the minimum authorized capital. For closed joint-stock companies, it amounts to only 10,000 rubles, and for open joint-stock companies - 100,000. In addition, one should be aware of legislative changes related to the names of such companies. Now they are called simply joint-stock companies, or abbreviated as "AO". However, as with the previous name, the principle of work of firms has not changed. The fourth significant difference between a closed joint-stock company and a closed joint-stock company is that in closed companies there is a pre-emptive right. Its essence is that if one of the participants decides to sell its block of shares, then the first thing the other shareholders will know about it. If the founders refuse to buy them, the holder may make a deal with a third party not affiliated with the company.
Limited liability company
In abbreviated form - LLC. Such organizations are very different from the joint-stock companies described above. The key difference is that such firms do not place their shares and generally do not work with securities. Participation in limited liability companies is based on the principles of shares. Despite this, only one person can act as a founder. Planning in the LLC is carried out using a meeting of participants, and the operational management is carried out by an appointed leader, for example, the general director. Such firms are the most popular legal forms in Russia. In addition, this name has not undergone any changes, unlike the above ZAO or JSC.