Company Structures and Growth Strategies: A Comprehensive Guide
Company Structures and Growth Strategies
Franchising
A franchise is an agreement where a franchisor grants a franchisee the right to market specific products or services in exchange for financial compensation.
Licensing
Licensing is when a company grants another the right to use a particular trademark or patent in exchange for a fee.
Subordination
Subordination occurs when a company charges another for a specific service or action.
Economic Interest Groupings (EIGs)
An EIG is a framework promoted by the EU to foster cooperation among EU companies. Its duration is indefinite and can extend to various areas of collaboration.
Term Contracts
A term contract is a long-term agreement between two companies to jointly develop a particular activity.
Consortia
A consortium is a partnership between several companies to achieve a shared objective without losing their economic or legal independence.
Internal vs. External Growth
Advantages and Disadvantages of Internal Growth
Internal growth may allow better management in areas such as purchasing new technology and optimizing industrial and commercial distribution. In contrast, external growth is typically more expensive due to factors like:
- Increased market value of the target company due to acquisition expectations.
- Economic efficiency improvements and increased value creation.
- Enhanced market power and improved productive capacity.
External growth is faster than internal growth as productive capacity is immediately incorporated.
In mature industries, entering through external growth is often easier and doesn’t change the overall industry size.
Individual Company Structures
Sole Proprietorship
A sole proprietorship is a company owned by an individual.
Characteristics of a Sole Trader
- Must be an adult.
- Must have full availability of their goods.
- Is subject to the general provisions of the Commercial Code and Civil Code.
- Has complete control of the company.
This structure implies total control by the owner. No minimum capital is required. The company name is typically the same as the owner’s. Sole proprietors are taxed through personal income tax.
Freelance Entrepreneur
Freelance entrepreneurs perform an economic or professional activity for profit regularly, personally, directly, and predominantly for a client (individual or legal entity). They receive at least 75% of their income from this client.
Conditions for Freelance Entrepreneurs
- Not be employed or subcontracted by the client.
- Not have their activity undifferentiated with the client’s employees.
- Provide their own infrastructure and production equipment.
- Manage their business under their own organizational criteria.
- Receive payment based on the result of their activity.
Private Civil Society
A private civil society is based on a contract where two or more persons pool money, property, or industry, with the intention of sharing profits.
Key Features of a Private Civil Society
- Agreements among members are confidential.
- Actions are individual.
- Must have a lawful object.
- Must be defined in the common interest of members.
- Duration is as agreed in the contract.
- Members have unlimited personal liability to third parties.
- The name can be any name chosen by the partners.
- Minimum of two partners.
- No minimum capital requirement.
- Formalized through a written agreement.
- Partners are taxed individually through payroll tax.
Company as a Legal Entity
This type of company has a legal personality distinct from its owners. All companies must register with the Registry.
Public Civil Society
Similar to a private civil society, but agreements between partners are public and constituted by public deed. They must be registered.
Trading Company
Comprised of one or more people with a common capital fund to operate a business for profit, sharing revenue, and having legal personality. Constitution must be formalized through a public deed and registered.