Home » Whats The Difference Between A Companies vs Business?

Whats The Difference Between A Companies vs Business?

The words business and companies vs business seem like synonyms, but the reality is far from this. Both terms are used with the same intent, however, both of them have very distinct meanings. 

Business is something that earns you money, it can be a shop, your freelancing gig, etc.

That is a company is when you want to do business with other formal places or one which is registered like a company.

These are the fundamental differences that also include many other issues in their relation.

Should you really be confused about knowing the key distinctions between a company and a business, then this passage provides you all the answers.

What is a Company? 

A company is like an individual having its own legal rights and responsibilities.

It is defined as a legal entity having its own rights and not a legal responsibility of an individual or a group.

A company is set up by the law of that country and is governed by the country’s company laws.

When compared to a business, a company vs business holds larger-scale functioning, also a company has limited liability because of which when a company suffers loss and is unable to repay the loans and debts, the creditor can not touch the private possession like a car, house, etc of the owner.

Also, if an individual wishes to expand his business to a large scale then it is best suitable for him to register it as a company. 

Types of Company

There are 5 types of companies, each with its distinct structure and purpose:

1. Public Limited Company (PLC) 

PLCs or Public Limited Companies are those companies that come up with a method to make money for themselves by selling their shares to the public. This is one of the methods they use to raise wealth, by issuing shares to the people in the market.

The shareholders of the company have limited liabilities which are basically beyond the liability of the shareholders and it avoids the possibility of them being held liable for the losses that are beyond their investment.

2. Private Limited Company (LTD) 

LTD or private limited companies are like PLCs except for the shares of a private limited company that are not available to the public but are privately owned by an NGO or a small group of shareholders. 

3. Limited Liability Partnership

In LLP or limited liability partnership, two or more individuals are responsible for the company.

This type of company structure benefits from limited liability. 

4. Royal Charter

Royal charter companies are the companies that have the power granted by the monarch, these types of companies vs business should get approval from the royal charter.

As of now, approval from royals is no longer needed to set up a company. 

5. Community Interest Company (CIC) 

CIC companies vs business models work with the motive to benefit the community rather than its shareholders.

The profits earned by the company are reinvested into the CIC so that it can benefit the community and achieve its objectives. 

What Is a Business? 

Any activity that generates wealth is called a business, it can be any good you sell or any service you provide, as long as it is giving some fiscal returns then it will be termed as a business. 

You don’t have to be a registered firm to carry on a business, even if you are a freelancer then too you are doing business.

Business usually starts under a single name which aims to build a reputation by providing goods or services. 

Types Of Business

There are two broad categories of business:

(i) Sole Trader

As the name suggests a sole trader is an individual who individually executes a business.

There can be some staff hired under him but they are not an entity in profit sharing, they merely are employees working on a salary basis.

In this type of business model, the sole trader is responsible for business debts 

(ii) Partnership

In a partnership business model, two or more partners are running a single business.

In this type of business model, the liabilities are distributed among the panthers according to a pre-agreed basis or according to profit sharing. 

Difference Between Company and Business

Here are some key differences between a company and a business. 

1. Setting Up

Setting up a company is much more complex than starting a business. 

All in all, business initiating is actually as easy as making a plan and licensing under HMRC and you will have no problem with goods you deal with just by getting a license with respect to them.

Besides: establishing a company will involve dealing with intricate legal processes and then you will have to fill some of the board positions, directors, etc.

2. Ownership 

Such trading is the responsibility of the business owner or partners, which could cause no profits and also bring more debts.

In contrast, a company is an individual legal legal system that collectively regulates itself.

While shares are by the public or selected shareholders, still the profits are retained by the company. 

3. Liability 

The liability of a business lies among the partners or the sole traders, which means that they will be responsible for all the debts or legal responsibilities of the business. 

On the other hand, a company having its own legal identity is liable for itself.

Investors and shareholders hold shares with limited liability and all other liability lies on the company. 

5. Taxes 

As a company, you pay taxes much higher than a business.

However, in a business, the owner has to pay the tax but in a company, the liability of tax lies on the company and not on the owner.

These were some differences between a company and a business. 

Companies vs Business: Do We Have the Right Option?

If you hear these two words together, you would normally think of them as being synonyms but there is a big difference between these two things.

But which of these, is more attractive, in your opinion?

The better choice between the both lies in personal opinion.

Both of them have different liabilities, profit-sharing policies, and trading.

Now it depends on an individual as to how much he expects from all these things. 

It is best advisable to consult an accountant before making a decision. 

What Makes a Business a Company? 

When registered by the legal norms of the country, a business gets its own legal entity, it is an entity separate from its owners, and this is when a business is turned into a company. 


Being aware that the words company and business are different is very crucial if you are willing to set up your own business or company. 

Both of them are often used interchangeably but contain vast differences between them.

A company has a much greater horizon than a business and can function more freely.

Richard Smith

I am Richard Smith from the USA. I’m an Email Marketing Specialist. I have my own blogging site blogest.org. where people will get all Paid Campaigns and Email Marketing and blogging information. I like to encourage and motivate the new youth generation who want to learn Digital Marketing.

10 thoughts on “Whats The Difference Between A Companies vs Business?

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top