6 Easy Differences in the Organization vs Company Dilemma
Last update: 21 March 2024 at 09:17 am
5.00/5Often, we interchange the words organization and company when talking about businesses and work, but really, these two words aren’t interchangeable to the point where we want to pin them against each other and explain to you the difference between organization vs company.
Large organizations and successful commercial companies all started 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.
In the battle between organization vs company, understanding how these two entities work can help you in your future dealings with them.
The major 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 earn a 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
- Purpose:
- Organisation: Serves a shared mission or cause.
- Company: Aim primarily for profit through commercial activities.
- Structure:
- Organization: Features diverse entities with varied hierarchies.
- Company: Follows clear hierarchical structures for business operations.
- Legalities:
- Organization: Requires specific legal formalities and may have a unique legal personality.
- Company: Adopts legal structures like sole proprietorship or corporation.
- Leadership:
- Organization: Governed by boards of directors to steer collective goals.
- Company: Led by individuals or management teams for business success.
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 and generally comprises 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 of people with a common purpose join 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, United Nations Children Fund, 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, with the sole aim to make a profit.
The kind of business that the company engages in will determine what 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, and they each have different ownership structures and regulations.
Public companies allow shareholders to own equity in the company through the stock exchange.
Private companies are held in private ownership and generally comprise businesses focused on long-term growth such as bringing together physical and digital worlds to create a phygital company.
Companies are generally formed to profit from business activities, but some companies can be structured as non-profit making charities.
A company can enter into 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.
Can a Company Also Be an Organization?
It’s not always organization vs company. Sometimes, a company can form part of a larger organization, along with other companies.
Under the organization‘s umbrella, companies support each other, which adds benefit to the whole organization. It works similar 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.
Organization vs. Company – The 6 Differences
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 need to apply for IRS tax exemption, draft bylaws, and appoint a board of directors, amongst a few other legalities.
Similarly, in the case of an LLC, you would also need to designate a registered agent like LegalZoom, Incfile, etc, who serves as the official point of contact for legal matters and official documents.
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 itself may or may not be listed and can have companies that are under its wing listed on the stock exchange.
Leadership
The leadership of a company and that of an organization differs 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 in such a way that it can 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 to achieve their goal of financial success.
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, to fight for a cause, or provide a service, these entities will provide a platform for the visionaries to achieve their ultimate goal.
