What is the Difference Between Company and Firm?

The terms "company" and "firm" are often used interchangeably in the business world, but they have distinct differences:

1. Definition: A company is a business that sells goods and/or services for profit and includes all business structures and trades, such as sole proprietorships, partnerships, and corporations. A firm, on the other hand, is a for-profit business organization that provides professional services, such as legal, accounting, or consulting services.
2. Business Structure: Companies can have various structures, including private limited companies, public limited companies, or one-person companies. Firms are typically formed as partnerships, but they can also be corporations or limited liability companies (LLCs).
3. Professional Services: Firms are mainly involved in providing professional services, such as legal, accounting, consulting, or marketing services. Companies, however, can be involved in all business trades and structures, including selling products and services.
4. Size and Scope: Firms are often smaller in size compared to companies, as they usually consist of one or more physical establishments with the same ownership and operating under the same employer identification number (EIN). Companies can range from small, private businesses to large, publicly traded corporations.
5. Legal Entity: A company is a legal entity, while a firm is not a legal entity in the eyes of the Internal Revenue Service (IRS). This means that companies have a legal status and can enter into contracts, own property, and have limited liability, whereas firms are simply for-profit businesses that sell services and products.

In summary, a firm generally refers to a business that provides professional services and operates as a partnership or LLC, while a company encompasses all business structures and trades, including selling products and services for profit.

Comparative Table: Company vs Firm

Here is a table comparing the differences between a company and a firm:

In summary, a company is a business that generates income through the sale of products or services, while a firm typically refers to a business providing professional services, often managed by two or more partners. The main differences between the two are in terms of management structure, cost of formation, ownership, and liability.