Firm
A firm is a for-profit business organization — such as a corporation, limited liability company (LLC), or partnership — that provides professional services. On the other hand, a firm typically excludes the sole proprietorship business; it generally refers to a for-profit business managed by two or more partners providing professional services, such as a law firm. A firm's business activities are typically conducted under the firm's name, but the degree of legal protection — for employees or owners — depends on the type of ownership structure under which the firm was created. A firm is a for-profit business organization — such as a corporation, limited liability company (LLC), or partnership — that provides professional services. Not to be confused with a firm, a company is a business that sells goods and/or services for profit and includes all business structures and trades.
What Is a Firm?
A firm is a for-profit business organization — such as a corporation, limited liability company (LLC), or partnership — that provides professional services. Most firms have just one location. However, a business firm consists of one or more physical establishments, in which all fall under the same ownership and use the same employer identification number (EIN).
When used in a title, "firm" is typically associated with businesses that provide professional law and accounting services, but the term may be used for a wide variety of businesses, including finance, consulting, marketing, and graphic design firms, among others.
Understanding Firms
In microeconomics, the theory of the firm attempts to explain why firms exist, why they operate and produce as they do, and how they are structured. The theory of the firm asserts that firms exist to maximize profits; however, this theory changes as the economic marketplace changes. More modern theories would distinguish between firms that work toward long-term sustainability and those that aim to produce high levels of profit in a short time.
Firm vs. Company
Although they appear synonymous and are often used interchangeably, there is a difference between a firm and a company. A company can be any trade or business in which goods or services are sold to produce income. Further, it encompasses all business structures, such as a sole proprietorship, partnership, and corporation. On the other hand, a firm typically excludes the sole proprietorship business; it generally refers to a for-profit business managed by two or more partners providing professional services, such as a law firm. In some cases, a firm can be a corporation.
Types of Firms
A firm's business activities are typically conducted under the firm's name, but the degree of legal protection — for employees or owners — depends on the type of ownership structure under which the firm was created. Some organization types, such as corporations, provide more legal protection than others. There exists the concept of the mature firm that has been firmly established. Firms can assume many different types based on their ownership structures:
Related terms:
Business
A business is an individual or group engaged in financial transactions. Read about types of businesses, how to start a business, and how to get a business loan. read more
Business Income
Business income is a type of earned income and is classified as ordinary income for tax purposes. How it is reported depends on the type of business. read more
Company
A company is a legal entity formed by a group of people to engage in business. Learn how to start a company and which is the richest company in the world. read more
Employer Identification Number (EIN)
An Employer Identification Number (EIN) is a unique number assigned to a business for easy IRS identification for tax reporting purposes. read more
Entity Theory
The entity theory is the theory that the economic activities, accounts, and liabilities of a business should be kept distinct from those of its owners. read more
Limited Liability Company (LLC)
A limited liability company (LLC) is a corporate structure that protects its investors from personal responsibility for its debts or liabilities. read more
Mature Firm
A mature firm is a company that is well-established in its industry, with a well-known product and loyal customer following with average growth. read more
Mergers and Acquisitions (M&A)
Mergers and acquisitions (M&A) refers to the consolidation of companies or assets through various types of financial transactions. read more
Société Anonyme (S.A.)
A société anonyme (S.A.) is a French business structure equivalent to a U.S. corporation. It protects the owners' assets against creditor claims. read more
Sustainability
Sustainability focuses on meeting the needs of the present without compromising the ability of future generations to meet their needs. read more