Organizational and legal forms of entrepreneurship. The classification of firms and their role in the economy.


The entrepreneur is a subject, activity of whom aims the getting of the income and is carried out on terms of own property responsibility.

It should also be noted that the terms business and entrepreneurship are not the same. The word business came into lexicon after transition to capitalism. Business in translation from English is the affair that brings income, business affairs between business people, the exchange of the results of activity, business contact. In the western books on business, for example “Conception of Business” such definition is given. “Business- is a system of managing the affair. Business is making the production that people need. Business is a work. Business is a central road in our economic system. It’s the system that we have made to satisfy our needs. It is how we live. ” In other words business is a system of production for satisfaction of the needs of the society. Business is wider notion than the entrepreneurship, as it involves the relations between all the members of market economy – and the entrepreneur and the consumers.

Individual entrepreneurship is based on the individual or the family property of the entrepreneur. Its peculiarity is that there is no difference between own capital and the capital that is used for the private needs, in other words the responsibility is spread on the whole property.

Individual entrepreneurship has 2 forms: individual work activity and individual private company.

Individual work activity is based on the work of the entrepreneur and his family members.

Partnerships are based on the incorporation of the property of different owners. The received by the partnership income after paid taxes is spreaded among the members of the partnership. The decisions in the partnership are taken by the majority of the members and the quantity of the votes of the members is in direct proportion to their share. As a rule partnership are closed companies, and the transmission of the shares to other owner is made only after agreement of the majority of members. Usually partnerships are not big by the quantity and all the members take part in its work.

Forms of the partnerships:

1. general partnership with unlimited responsibility is based on the mutual duties of the members and the spreading of the incomes due to the general and joint responsibility.

2. LTD is responsible only by the capital of the partnership, in other words the member risks only with his share

3. mixed partnership unites its members on the principal of the complete responsibility and the part on the principal of the limited responsibility (depositor-members). The rights to vote only the factual members have.

4. joint-stock company is made by the incorporation of the means of its stockholders, usually it’s a LTD, as the members risk only with the capital that was deposited into the stocks.

The difference between joint-stock company and partnership is that their capital is usually made in the money form, and is broken into indivisible shares, that are presented in the form of stocks.

3. state entrepreneurship is the activity of state enterprises, that produce goods and services, that the national economy needs. The state sector is made by the enterprises that are fully owned by the state or controlled by it by the control holding of stock. Usually in the state sector are those enterprises that are not reasonable to use in the private activity.

The presence of the state sector in the national economy along with the market regulation lets the present market economy be named as the mixed market economy.

Any economic activity is combined with the phases of the reproduction cycle (production, division, exchange, usage), that is why such kinds of the entrepreneurship activity are: productive, commercial, financial, agent and insurance.

Productive entrepreneurship includes the production of the industrial and agricultural production, consumer goods, building works, transportation, connection services, and informative activity.

Commercial entrepreneurship is spread on the production and the consumption of the goods and services. The main parts are shops, markets, broker’s boards, auctions.


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