Classification of enterprises

Enterprises can be classified according to many characteristics (Table 1.1.).

Table 1.1.

General classification of enterprises

A state-owned enterprise is one whose property belongs to the state. It can be created from budget allocations, contributions from other state enterprises or other sources. A distinction is made between state-owned enterprises that are in republican ownership and utility enterprises.

The property of the former is managed by the Ministry of Economy of the Republic of Belarus. Utilities are the property of administrative-territorial units.

State-owned enterprises have the following advantages over privately owned enterprises: significant financial opportunities for expanding and improving production at the expense of the budget; high credit rating, which facilitates the possibility of obtaining loans; the use of highly qualified specialists in various areas of management, which only a large owner can afford.

The noted advantages of state-owned enterprises allow them to function effectively in countries with developed market economies and successfully compete with private enterprises.

A private enterprise is an enterprise owned by an individual or members of his family, as well as a non-state legal entity. A distinction is made between sole and family private enterprises. Unlike sole proprietorships, family businesses are based on the common property of all family members. A non-state private enterprise may also be owned simultaneously by several persons on the basis of shared or collective ownership. Such enterprises include business companies, economic partnerships and production cooperatives.

The market economy, based on a variety of forms of ownership, involves the functioning of enterprises of various organizational and legal forms.

The organizational and legal form of the enterprise is determined by many features:

a) the procedure for the formation of the authorized fund;

b) the degree of responsibility for the obligations of the enterprise and others.

In accordance with the Civil Code, the following organizational and legal forms of commercial enterprises may be established in the Republic of Belarus: economic partnerships and societies, production cooperatives, unitary enterprises.

Business partnerships are a form of entrepreneurial activity in which the property of the enterprise is formed at the expense of the contributions of several citizens and (or) legal entities that are united for joint activities on the basis of an agreement between them. A distinctive feature of business partnerships from other forms is that one or more participants bear unlimited joint and several property liability for the obligations of the partnership.

Depending on the degree of responsibility of individual participants, full and limited partnerships are distinguished.

The members of the general partnership, in accordance with the contract concluded between them, are engaged in entrepreneurial activities and are liable for its obligations with the property belonging to them, i.e. unlimited liability applies to the participants of the general partnership.

A member of a general partnership who is not its founder shall be liable on an equal footing with other members for obligations incurred prior to his or her entry into the partnership.

A member who has withdrawn from the partnership shall be liable for the obligations of the partnership arising prior to its departure, on an equal footing with the remaining members within two years from the date of approval of the report on the activities of the partnership for the year in which he left the partnership.

A limited partnership is a partnership in which, along with the participants who carry out business activities on behalf of the partnership and are responsible for the obligations of the partnership with their property, there are participants-investors (commandites) who bear the risk of losses within the limits of their contributions and do not take part in the implementation of business activities by the partnership.

A business entity is a legal entity established by agreement by legal entities and (or) citizens by combining their property for the purpose of carrying out economic activities. A distinctive feature of this organizational and legal form is the limited liability of all its participants (shareholders) for the obligations of the company.

There are the following types of business companies: limited liability, with additional liability, joint-stock. A limited liability company can be established by one or more persons, the authorized capital of which is divided into shares of the amounts determined by the constituent documents.

Participants of a limited liability company bear the risk of losses associated with the company’s activities within the value of their contributions.

The peculiarity of the company with additional responsibility is that its participants bear subsidiary responsibility for the obligations of the company in the same multiple for all to the value of their contributions.

A joint-stock company is a company whose authorized capital is divided into a certain number of shares. The company’s participants are not liable for its obligations and bear the risk of losses associated with the company’s activities within the value of their shares.

A joint-stock company whose members can freely sell their shares without the consent of other shareholders is recognized as an open joint-stock company. Such a company has the right to conduct an open subscription to the shares issued by them and their free sale under the conditions established by law.

A joint-stock company whose shares are distributed only among its founders or other predetermined circle of persons is recognized as a closed joint-stock company. Such a company is not entitled to conduct an open subscription to the shares issued by it.

Features of the functioning of joint-stock companies are as follows:

they use an effective way to mobilize financial resources; dispersion of risk, because each shareholder risks losing only the money that he spent on the acquisition of shares; participation of shareholders in the management of the company; the right of shareholders to receive income (dividend); additional opportunities to stimulate staff.

Production cooperatives are a voluntary association of citizens on the basis of membership for joint production or other economic activities based on their personal labor or other participation and the association by its members (participants) of property share contributions. Members of a production cooperative bear subsidiary liability for its obligations.

The profits of the cooperative are distributed among its members in accordance with their labor participation. In the same manner, the property remaining after the liquidation of the cooperative and the satisfaction of the claims of its creditors are distributed. A distinctive feature of production cooperatives from economic partnerships is that they do not allow the participation of legal entities. Otherwise, the mechanism of functioning of cooperative enterprises is the same as that of economic partnerships.

A unitary enterprise is a commercial organization that does not have the right of ownership of the property assigned to the enterprise. The property of a unitary enterprise is not divisible and cannot be distributed by deposits (shares, shares), including among the employees of the enterprise.

In the form of unitary enterprises, state (republican or communal) or private enterprises can be established.

The property of a unitary enterprise is in state or private ownership.

Unitary enterprises are divided into two categories:

unitary enterprises based on the right of economic management; unitary enterprises based on the right of operational management.

The right of economic management is the right of an enterprise to own, use and dispose of the property of the owner within the limits established by law or other legal acts. The right of operational management is the right of an enterprise to own, use and dispose of the property of the owner assigned to it within the limits established by law, in accordance with the objectives of its activities, the tasks of the owner and the purpose of the property. A unitary enterprise based on the right of operational management is called a state-owned enterprise. Created by the decision of the Government of the Republic of Belarus, the Republic of Belarus bears subsidiary responsibility for the obligations of a state-owned enterprise in case of insufficiency of its property.

The right of economic management is broader than the right of operational management, i.e. an enterprise operating on the basis of the right of economic management has greater independence in management.

Foreign investors have the right to create commercial organizations in the territory of the Republic of Belarus in any organizational and legal forms.

Enterprises in the authorized capital of which foreign investments amount to an equivalent amount, not less than 20,000 US dollars and which, as the main goal of the activity, pursue the extraction of profit (income), are called commercial organizations with foreign investments. Such enterprises may be established in the form of business companies or private foreign unitary enterprises.

All commercial organizations with foreign investments are divided into commercial joint or commercial foreign organizations.

A commercial joint organization is an enterprise whose authorized capital consists of the share of a foreign investor and a share of individuals and (or) legal entities of the Republic of Belarus.

A commercial foreign organization is an enterprise in the authorized capital of which foreign investments account for 100%.

The activities of commercial organizations with foreign investments in the territories of the Republic of Belarus are regulated by the Investment Code of the Republic of Belarus.

In accordance with this code, foreign investors are provided with a number of benefits and guarantees. In particular, benefits for tax and customs payments, guarantees for the transfer abroad of profits due to a foreign investor, a favorable legal regime for investment activities, etc.

The main principles of creating commercial joint organizations are:

pooling of capital belonging to persons or enterprises of different states; joint management of the enterprise through the division of management functions between partners; joint bearing of risks; joint participation in profits.

The property of the enterprise, the products produced and profits are the common property of the partners and are distributed among them in accordance with their contributions to the authorized capital.

Commercial joint ventures operate both on the principles of economic calculation and take into account in their activities other principles conditioned by joint entrepreneurship. These are the principles of mutual benefit and balance of interests, currency self-sufficiency.

The creation of joint ventures in the territory of the Republic of Belarus is aimed at attracting modern technologies and equipment to the national economy, increasing the competitiveness of products and developing the country’s export potential.

A commercial organization with foreign investments can be created by its establishment or as a result of the acquisition by a foreign investor of a share (shares) in another enterprise or the acquisition of an enterprise as a property complex in whole or in part.

The procedure for the formation of the authorized fund announced in the constituent documents depends on the organizational and legal form of a commercial organization with foreign investments. So, for an LLC, ALC, CJSC or a private foreign unitary enterprise, it must be formed not less than 50 percent during the first year from the date of state registration of this organization by each of the founders not making 50 percent of its share in it and in full – until the expiration of two years from the date of registration. For OJSC, the authorized fund must be formed in full before the state registration of such an organization.

The founders (participants) of a commercial organization with foreign investments have the right to contribute to the authorized capital of this organization in monetary and (or) non-monetary form.

The advantages and disadvantages of the various organizational and legal forms of enterprises are presented in Table 1.2.

Table 1.2 Resource requirements by component

Comparative characteristics of organizational and legal
forms of enterprises

Continuation of Table. 1.2