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Firma is a Form of Business Entity that is a Partnership, Know Its Advantages and Disadvantages

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Firma is a Form of Business Entity that is a Partnership, Know Its Advantages and Disadvantages Illustration (credit: freepik)

Kapanlagi.com - In the business world, we are familiar with various types of business entities. Firma is one of them. Similarly, other forms of business entities such as individual ownership, CV, PT, the rules regarding the establishment of a firma are also regulated in the Commercial Code and the Civil Code.

Although they are based on the same legal basis, firma is certainly different from other legal entities. In general, firma is an association established to operate a company that is under another company with a common name. Knowing what firma is becomes very important, especially for those of you who are planning to establish a business entity.

Summarized from various sources, here is an explanation of firma as one form of business entity.

1. Definition of Firm

If viewed from its meaning, "firma" is taken from the Dutch language venootschap onder firma (V.O.F) or a commercial association between several companies called Fa. Meanwhile, in the Great Indonesian Dictionary (KBBI), the meaning of firma is a commercial association established to carry out joint commercial activities under one name in which each participant is jointly responsible.

Based on the brief explanation above, it can be concluded that firma is basically a form of association or partnership. This means that firma can be established by agreement between two or more people. Generally, the establishment of firma is based on an agreement. The activities carried out by a firma can be done on a small or large scale.

Firma has a unique membership system. Each member of the firma has a representative agent to work together. The members of the firma will surrender personal wealth according to the provisions in the company's establishment deed. If the firma suffers losses or goes bankrupt, then each member must bear responsibility. Therefore, the ownership status of a firma is a common interest.

2. Characteristics of Firms

As a form of legal entity, firms have their own characteristics. These can be seen in several characteristics of firms. The characteristics are as follows:

1. Firms are generally established using a common name in business activities.

2. Firm agreements can be made before a notary or privately.

3. The establishment of a firm does not require a deed of establishment.

4. Firm members usually trust each other.

5. Each member of the firm has the right to become a leader.

6. Liability and the risk of loss are unlimited and must be borne by all members.

7. Firm membership is lifelong.

8. Each member has the right to dissolve the firm.

9. No member has the right to admit new members without the consent of other members.

10. Relatively easy to apply for business credit.

3. Advantages and Disadvantages of Firms

As mentioned earlier, a firm is very different from other types or forms of business. Not only in terms of understanding and characteristics, but also in business implementation. This then has an impact on the advantages and disadvantages of a firm as a form of business. Knowing the advantages and disadvantages of a firm can be your consideration in choosing this form of business. What are they?

The advantages and disadvantages of a firm are as follows.

1. Advantages of a Firm
Compared to other forms of business, a firm has several advantages, as follows.

1) The establishment of a firm can be done with relatively easy procedures.

2) The amount of capital to establish a business is collected from each member, so it is quite large. As a result, it will facilitate business expansion.

3) With the capital and finances from several people that are gathered and quite large, it is easier to obtain credit.

4) The establishment of a firm is done by several people, so it has the potential to manage a larger management due to the division of work. Moreover, members who are professionals and skilled in the same field.

5) Rational reasons for joining

6) Members' genuine attention to the company

2. Firm's shortcomings
Like two sides of a coin, besides having advantages as a form of business entity, a firm also has several shortcomings. Here are some of them.

1) Unlimited liability for the entire company's debt.

2) Leadership is held by more than one person. This is risky as it can lead to disputes if each leader tries to dominate each other.

3) The mistakes of a firm member must be shared.

4) The survival of the company is not guaranteed, because if one member leaves, the Firm Corporation will also dissolve.

5) The company's business debt is borne by the personal wealth of the firm's members.

4. Types of Firms

Firm is a form of business entity that has several types. The following are the types of firms.

1. General Partnership
General partnership is a type of firm where all members have unlimited authority. This means that each member is responsible for the company's operations, including debts and credits.

2. Limited Partnership
On the other hand, limited partnership is a type of firm where all members do not have unrestricted authority. Therefore, the responsibilities and obligations of its members are limited.

3. Trading Firm
Trading firm is a type of firm that operates in the trading industry and focuses on buying and selling activities.

4. Non-Trading/Service Firm
Non-Trading/Service firm is a type of firm that operates in the service industry. This firm focuses on selling or providing services based on expertise. For example, law firms, accounting firms.

Those are some explanations about firms, which are a form of business entity that is a partnership. Hopefully, it is useful and can enhance knowledge.

(kpl/psp)

Disclaimer: This translation from Bahasa Indonesia to English has been generated by Artificial Intelligence.
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