6 Easy Differences in the Organization vs Company Dilemma
Last update: 16 February 2024 at 01:55 pm
3.57/5Often, we interchange the words organization and company when talking about businesses and work. Still, these two words aren’t interchangeable to the point where we want to pin them against each other and explain the difference between organization and company.
Large organizations and successful commercial companies start with an idea, a purpose, or a goal.
When people come together over these things, a business structure helps them achieve their goals. Institutions like banks, businesses, non-profit charities, and government departments play an essential role in our economy and provide a valuable service to the public.
Without these legal entities, there would be no control over business dealings and commercial activities, and the possibility for growth and expansion is limited.
Understanding how these two entities work can help you in your future dealings with them in the battle between organization vs. company.
The significant difference between the two is that:
An organization works for the greater good and has a common shared purpose.
A company’s primary goal is to profit through commercial business activities. A company can form part of an organization, but an organization is not just a company; it is so much more.
Key Takeaways: Organization vs. Company
- Definition:
- Organization: A group cooperating for a common purpose, encompassing businesses, government departments, and non-profits.
- Company: A collection of individuals operating a commercial business focusing on profit.
- Examples:
- Organization: Corporations, political organizations, NGOs, armed forces, charities, partnerships, cooperatives, and educational institutions.
- Company: Engages in commercial activities, private or public, and focuses on specific products or services.
- Differences:
- Legalities:
- Organization: Varied legal structures with boards of directors.
- Company: Clear hierarchy and reporting channels with CEOs or managing directors.
- Shareholders:
- Organization: May or may not be listed, but can have companies under its umbrella.
- Company: Public companies offer equity shares on stock exchanges.
- Leadership:
- Organization: Relies on a board of directors.
- Company: Led by an individual with a supporting management team.
- Size:
- Organization: Set up for growth, accommodates other companies.
- Company: Can vary in size, and structure for commercial success.
- Focus:
- Organization: Aims for collective goals with a common purpose.
- Company: Primarily focused on profit and commercial success.
- Legalities:
- Company vs. Firm:
- Company: General term for businesses of various sizes and structures.
- Firm: This may suggest a more formal context, often associated with professional services.
- Organization vs. Corporation:
- Organization: Broad term encompassing various groups; can be for-profit or non-profit.
- Corporation: Specific legal entity with distinct characteristics, including limited liability and perpetual existence.
- Conclusion:
- Organization: Emphasizes collective goals and shared purpose.
- Company: Founded for profit, commercial success, or specific service provision.
What Is an Organization?
An organization is a group of people consciously cooperating with a common purpose.
It can be a business or government department comprising two or more persons.
An organization is not just a company but a more extensive legal entity that contains other companies.
Larger groups and businesses opt for an organizational structure that can grow and expand with the group’s shared purpose.
Organizations can include non-profit entities such as churches, charities, and sports organizations. A hybrid organization operates in the private and public sectors and engages in both commercial activities and civic duties.
What Are Examples of an Organization?
An organization is created when a group with a common purpose joins forces.
A few examples of the different types of organizations include:
- Corporations
- Political organizations
- Non-governmental organizations
- Armed forces
- Charities
- Partnerships
- Cooperatives
- Educational institutions
Non-profit organizations such as The Metropolitan Museum of Art, the United Nations Children Fund, and the American Red Cross are also examples of organizations.
What Is a Company?
A company is a collection of individuals working together to operate a commercial business. The business will focus on a specific product or service to make a profit.
The kind of business the company engages in will determine the type of business structure it chooses: Partnership, Proprietorship, or Corporation. The words firm, business, and corporation all refer to a company.
Companies can also be private or public, each with different ownership structures and regulations.
Public companies allow shareholders to own equity in the company through a stock exchange, like NYSE, for example.
Private companies are held in private ownership and generally comprise businesses focused on long-term growth, such as bringing physical and digital worlds together to create a phygital company.
Companies are generally formed to profit from business activities, but some can be structured as non-profit charities.
A company can enter a contract, borrow money, own assets, pay taxes, and hire employees. A company can have the same legal rights as a person.
The benefit of registering a commercial venture as a company is the creative freedom and flexibility it gives the owners.
There is a direct correlation between effort and reward. The disadvantage is that there’s more financial responsibility for the owners.
Is a Company an Organization?
It’s not always organization vs company. Sometimes, a company can form part of a larger organization and other companies.
Under the organization’s umbrella, companies support each other, which benefits the whole organization. It works similarly to a major league club and all its farm teams: the organization is the club, and the companies provide the best players, making the club better and stronger.
The transfer of skills and experience across companies strengthens the organization.
What’s the difference between organisation and company?
Six main factors differentiate companies from organizations, and they’re not a well-kept secret. With little to no effort, you can find all the details of any company or organization registered with a governmental and financial agency.
Legalities
There are four main types of legal structures a company can adopt:
- Sole Proprietorship
- Partnership
- Corporation
- Limited Liability Company
The legal personality of an organization is different from other legal entities. For example, to register a non-profit organization, you must apply for IRS tax exemption, draft bylaws, and appoint a board of directors, amongst other legalities.
Structure
The structure of an organization and a company is the main difference between them.
A company has clear lines of hierarchy and reporting channels. The Chief Executive Officer or Managing Director heads the team with support from managers. An organization comprises a group of people represented by a Board of Directors.
Shareholders
A public company adds value for its shareholders by offering them equity shares on the stock exchange. An organization may or may not be listed and can have companies under its wing listed on the stock exchange.
Leadership
The leadership of a company and that of an organization differ in its structure. An organization depends on its Board of Directors and aims to add value to customers, employees, and communities.
A company is steered by an individual and supported by a management team.
Size
A company can consist of one or more people and may stay small or evolve into a large company. The structure of a company allows it to grow and become a commercial success.
An organization is set up to grow and accommodate other companies under its organizational structure.
Focus
A company’s primary focus is to make a profit and become a commercial success. An organization aims to achieve the collective goals of a group of people with a common purpose.
Organizations work closely with the communities in which they operate. Their focus on a specific commercial activity helps them achieve their financial success goal.
What is the difference between company and firm?
The terms “company” and “firm” are often used interchangeably, but their usage can differ subtly depending on the context and region. The distinctions are generally not strict, and the terms are often used synonymously. However, some tendencies can be observed:
1. Size and Formality:
- Company: This term is often used in a broader sense and can refer to businesses of various sizes and structures, including small businesses, large corporations, and even non-profit organizations.
- Firm: “firm” is sometimes associated with a more formal and professional context. It might describe businesses that provide professional services, such as law, consulting, or accounting firms.
2. Nature of Business:
- Company: A more general term can be used across different industries and sectors.
- Firm: The term “firm” is sometimes associated with businesses that provide services rather than tangible goods.
3. Usage in Legal Context:
- Company: This term is commonly used in legal documents and business registrations.
- Firm: In legal contexts, especially in professions like law and accounting, “firm” is often preferred.
4. Regional Variations:
- Company: The term is widely used and accepted globally.
- Firm: In some regions or countries, “firm” might be more commonly used than in others.
5. Colloquial Use:
- Company: It is a more commonly used term in everyday language.
- Firm: This term might be used in more formal or professional discussions.
The choice between “company” and “firm” often depends on tradition, industry conventions, and personal preference. In many cases, the two terms can be used interchangeably without confusion.
What is the difference between an organization and a corporation
The terms “organization” and “corporation” are related but refer to different concepts within the broader business and management context. Here are the key differences between an organization and a corporation:
1. Scope and Generality:
Organization: This broad term encompasses any group of people or entities working together towards common goals. It can refer to various entities, including businesses, non-profit organizations, government agencies, clubs, etc.
Corporation: This is a specific type of legal entity within the category of organizations. A corporation is a formal and legal structure created to conduct business. All corporations are organizations, but not all organizations are corporations.
2. Legal Structure:
Organization: It is a general term and does not specify the legal structure. Organizations can take various legal forms, such as partnerships, sole proprietorships, non-profits, and corporations.
Corporation: A specific legal structure is characterized by a separate legal identity from its owners (shareholders), limited liability for its shareholders, and perpetual existence unless dissolved.
3. Ownership and Liability:
Organization: Ownership structures and liability vary based on the specific type of organization. For example, owners may have unlimited liability in a partnership, while shareholders typically have limited liability in a corporation.
Corporation: Shareholders own the corporation but are generally not personally responsible for the company’s debts or legal obligations beyond their investment.
4. Profit and Non-Profit:
Organization: This can be for-profit or non-profit, depending on its goals and structure.
Corporation: A for-profit corporation focused on generating profit for its shareholders or a non-profit corporation dedicated to a specific mission without the primary goal of making a profit.
5. Regulation and Governance:
Organization: Governance structures and regulatory requirements vary widely based on the type of organization and its legal form.
Corporation: Typically subject to specific regulations governing corporate structure, governance, financial reporting, and shareholder rights.
6. Perpetual Existence:
Organization: May or may not have perpetual existence. Some organizations, like sole proprietorships, may cease to exist upon the owner’s death, while others may continue with a change in ownership.
Corporation: Has perpetual existence, meaning it can continue operating regardless of ownership or leadership changes.
In summary, while all corporations are organizations, not all organizations are corporations. “Organization” is a broader term encompassing various entities, while “corporation” refers to a legal structure with distinct characteristics, including limited liability and perpetual existence.
In Conclusion
An entrepreneur with a vision will form a company, and a group of like-minded people with a shared goal will register an organization. These businesses and organizations create wealth and employment, provide services, and look after the well-being of us and the planet.
So, in the organization vs. company battle, whether the vision is to make a profit, fight for a cause, or provide a service, these entities will provide a platform for the visionaries to achieve their ultimate goal.
