Definition of Firm: Characteristics, Types, and Steps of Firm Establishment

What is the definition of a firm? The word firm derives from the Dutch language, specifically vennootschap onder firma or VOF, which can be translated as a multi-company trade union.

In general, the firm is referred to as a joint venture between two or more companies to operate a business under a common name. In a division of ownership, a company is owned by numerous people or companies as long as each member of the partnership contributes personal assets as stipulated in the company’s document of incorporation.

Firm

Procedure for Starting a Business

1. Molengraaff

A firm, according to Willem Molengraaff, is a partnership, association, or association formed to operate a business under a common name and whose members are not liable for the business’s dealings with third parties.

2. Werewolf

Meanwhile, Wery claims that the company is a corporation operating under a common name but not as a limited liability corporation.

3. Slagter

Furthermore, according to Slagter, the term refers to a collaboration agreement between two or more people who share a same name to carry out the activities of a business in order to profit from joint property rights. This is done so that the company may meet the goals of the parties involved, which necessitates entering money, commodities, good names, rights, or a combination of these into the agreement.

4. Commercial Law in Indonesia

A firm, according to the Republic of Indonesia’s Commercial Law, is any entity formed with the intention of operating a business under a common name.

To summarize, a firm is a corporate entity that is created and operated by two or more people (referred to as Firmants) who utilize a common name or a single name to build the company.

A Firma Company is defined as each corporation (maatschap) founded to run a company or business under one common name, where each member is fully liable for all actions carried out under the same name, according to Article 16 and Article 18 of the Commercial Code of the Ministry of Finance. third-party individuals

The firm, however, is not a legal entity. In terms of concept, the firm does not recognize the term “asset separation” amongst its members; instead, each member is directly responsible for the company’s overall success and long-term viability. Furthermore, the firm cannot be considered a legal entity because it has met the material conditions but has not yet met the formal requirements of ratification or recognition by the State in the form of legislation.

What is the Firm Theory?

The Theory of the Firm, often known as Firm Theory, is a collection of economic theories that define and envisage the nature of a corporation (company), from its structure to its market relationship, behavior, and survival.

The hypothesis is intended to provide answers to the following questions:

1. Existence

Existence is significant since it is the foundation for the existence of businesses. Why aren’t all interactions in an economy managed through markets? is a common question.

2. Set a limit

Boundaries become necessary because the market-company boundary is precisely where it is. It has a lot to do with the output’s volatility and size. Which deals are negotiated in the market and which are carried out internally? This is a common question.

3. Scheduling

The existence of an organization can be represented by a diagram of a frima in order to address the question of why the corporation is constructed the way it is, with hierarchies, central points, and so forth.

4. Company Actions/Performance Heterogeneity

The purpose of company performance is to answer the question of why firms do what they do and what motivates them.

5. Confirmation

Because what tests are currently available for each theory, evidence is critical.

Adam Smith was a Scottish moral philosopher and the founder of the field of political economy. Many consider Adam Smith to be the “father of modern economics” because of his enormous treatise, The Wealth of Nations. He stressed that when working alone, they are more efficient in the production industry than laborers or craftspeople.

A manufacturing corporation employs a more intense form of division of labor than can be governed through market exchange, according to Adam Smith. Classical economists mostly agreed with his view of the enterprise in terms of different types of division of labor.

Firm Characteristics

Some of the distinguishing qualities of a firm‘s business entity in comparison to other business entities. Understanding the qualities and characteristics of businesses might help you learn more about the different types of business entities out there. If you wish to start a business or a firm, this knowledge might be really useful. The following are the characteristics of Indonesian businesses:

  • Members of a firm are usually familiar with and know each other, thus they may already trust one another.
  • A notary can be entrusted with a firm agreement, or it can be signed by hand.
  • In business, using a single common name.
  • Has a limitless danger of loss and liabilities.
  • If a debt is not paid, each owner is responsible for repaying it with personal assets.
  • Every member of the Firm has the ability and obligation to lead.
  • You are not permitted to add new members to the Firm without the permission of the other members.
  • It is possible to join the firm for the rest of your life.
  • Members of the firm have the power to dissolve it.
  • Business loans make it easier to add money.
  • A deed of establishment is not required for a firm establishment.

What are the different types of businesses?

After learning about the definition of a firm, the next step is to learn about the many sorts of businesses in Indonesia.

1. Trading Company (Trading Partnership)

A trade firm is one of many different sorts of trading companies. Buying and selling things is the major emphasis of trading activity.

Nike, Diadora, Crocs, and other trading companies in Indonesia are examples.

a. Nike, Inc.,

Nike is well-known in practically every country on the planet. The Nike corporation is based in Uncle Sam’s homeland, the United States. Nike’s flagship product, shoes, is not simply sports equipment such as apparel. Nike has become a popular brand among sports enthusiasts, thanks to the incorporation of technology into each of its goods. As a result, Nike is rapidly developing and expanding its market in numerous nations, including Indonesia.

Until now, Nike has a lot of work to do in Indonesia to increase its outlets. Starting with the production process and its administration, this development is carried out. Not only that, but Nike’s central firm in the United States continues to employ standards for its implementation and management methods.

b. Diadora Firm, Inc.

The Diadora Company manufactures sporting equipment. Various sports equipment such as rugby, sports shoes, athletes, football, tennis, cycling sports, and so on is made. Marcello Danieli, an Italian businessman, and a group of other people formed the Diadora Company.

c. Crocs Firm Company,

Crocs, a company that makes fashion products such as shoes and sandals, is an example of a company that is also involved in fashion in Indonesia.

This demonstrates that the Crocs company is one of many sorts of trading companies that have been successful in creating goods for the community. Crocs manufactures rubber sandals and shoes in a variety of forms and colors to appeal to the general audience.

2. Non-Trading Company (Service Firm)

Non-trading enterprises, in contrast to trading firms, provide services. The company’s main operation is to market a product using a combination of expertise and so-called skills or services.

Non-trading firms in Indonesia, such as legal firms, accounting firms, management consulting firms, and others, are discussed in the following instances and explanations.

a. Law Office

Law businesses and legal consultancy firms are frequently referred to as law firms. Because their activities are tied to legal institutions, law firms are included in the category of non-trade firms.

Because it was formed and controlled by a group of people, the legal practice is an example, one of many in Indonesia. Law firms are made up of active and passive allies who get together to provide legal services to the public.

b. Accounting Firm

Accounting firms are one sort of non-trading firm in Indonesia, in addition to law firms. The goal of establishing this accounting firm is to provide accounting services outside of a company’s accounting agency.

This accounting firm is run by a small group of persons with the goal of providing accounting services to individuals, legal entities, and businesses.

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