Company vs Business: What's the Difference?

Though we use both terms fairly regularly, there's still significant confusion as to what the difference between a company and a business is. Here, we take an in-depth look at how you can distinguish a company from a business and what other types of organisation there are to consider.

Definition of a business

A business is an individual or organisation that engages in commercial or industrial activities on a regular basis. These can be either for-profit or non-profit, but businesses typically operate as profit-seeking organisations that aim to meet a specific demand in the market. They’ll often trade under a single name and attempt to build a reputation based on that identity.

“Business” is a wide-reaching term that encompasses a large number of organisational structures and entities. It is often confused and used interchangeably with the term "company," though the two refer to different concepts. Businesses have become an integral part of modern political and economic systems and are the dominant force on national and international markets.

Company vs business

On the other hand, the term “company” is used to refer to a distinct legal entity that has been registered with Companies House in London. The two terms – company and business – can also be distinguished in the following ways;

• Registration – all companies receive a Certificate of Incorporation from Companies House. They are set up as a separate legal entity that’s distinct from the individual who owns it.

• Ownership and responsibilities – whereas a business is owned by those who manage it and they are responsible for its debts and legal affairs, a company is a separate legal entity. It can own property, employ staff, and assume debt.

• Taxes – a business is operated by self-employed individuals who must file their tax return at the end of the tax year. Alternatively, a company has to file a Corporation Tax Return at the end of the tax year.

Other types of business entity

Besides companies, there are many different structures businesses can assume. These include;

1. Sole Trader

A sole trader is a single individual who owns and runs a business without the help of any other owner. Though they may employ staff, they do so in their own name and not the name of their business. As a sole trader, the individual is entirely liable for any legal actions brought against the business or any debts accrued by the business.

2. Partnership

A partnership occurs when two or more individuals collaborate in a business venture in an effort to turn a profit. Typically, the business will be operated in both/all of the partners' names, and all contracts will be made with the partners. As with a sole trader, partnerships are jointly liable for all legal actions taken against the business and any debts accrued. However, partnership agreements or contracts can be used to establish alternative terms that override these rules. It’s common for many partners to define the relationship in contractual form before they begin trading together.

3. Franchise

A franchise is a business that licences the rights to its name, brand identity, operating procedures, and trademarks to individuals who want to manage and run their own business. These individuals are known as franchisees. Franchisees must conduct their new business in keeping with the stipulations set out in the franchise agreement. This means meeting certain standards, utilising specific products, and maintaining the reputation of the brand.

Franchising is a popular means of expanding a business across a vast territory, as it allows businesses to open up numerous stores and delegate the day-to-day operations to franchisees. While franchisees take most of the profits, they also have to pay a one-off fee to set up a franchise and then a monthly royalty fee for the right to continue operating as a franchised business. The franchisor also benefits by capturing greater market share and increasing their brand’s reach.

What is a business to business company?

Generally, companies can be divided into two broad camps – business to business (B2B) companies and business to customer (B2C) customers. Business to business companies specialise in providing goods and services to other businesses. On the other hand, business to customer companies deal with products and services that are targeted at individual consumers.

In reality, there's often a great deal of cross-over between B2B and B2C operations. While some organisations deal exclusively with one or the other, many businesses offer both B2B and B2C goods and services. In large part, this is because a mixture of both allows for diverse revenue streams that can support a business through difficult times.

Are there B2B franchises?

In recent years, B2B franchises have taken off in an unprecedented manner. In many respects, this is due to the way in which the internet has disrupted traditional industries to such an extent that new, niche markets have begun to emerge. For instance, digital marketing franchises can offer B2B web development services because the traditional means of advertising have been replaced and there's now a significant demand for web support.

However, there are also many B2B franchises that have nothing to do with digital technologies. Typically, these are businesses that supply other businesses with the tools or equipment they need to carry out their work. Often, they’re van-based and mobile, allowing them to reach customers all the way across their territory.

Who are the biggest B2B franchises?

If you're looking to identify the biggest B2B franchises on the market today, there are a few businesses to take into consideration. Activ Net Marketing specialises in web development for businesses and is an attractive proposition for anyone looking to make the most of low start-up costs. Mac Tools are a well-known brand that retails tools to businesses around the UK. Though they're a US-based franchise, they've managed to establish a wide-reaching presence in the UK domestic market. Finally, FASTSIGNS provides businesses with effective signage that communicates brand identity and is designed to appeal to and attract customers.

The Editorial Team, Point Franchise ©