How are companies classified according to legal form?

Companies classified according to legal form

Organizations need to direct their actions towards the achievement of their objectives, for this reason, it is essential that they keep in mind what will be the way in which they are going to establish and carry out strategies to enhance their strengths, eliminate their weaknesses, take advantage of opportunities and face the threats.

The formulation and implementation of such strategies makes it necessary to take into account the organizational philosophy and policies, the physical and technological infrastructure resources, as well as the accounting and financial information.

In order that you can identify the different types of organizations existing in the environment, their definition and their characteristics, below, we explain the classification of companies in Colombia, so that you have a reference when choosing the class of company that adjusts to your needs and that you can guide your actions in an organized way.


We explain the reasons for bookkeeping your company


There are numerous different types of companies / legal entities in Colombia. This must be chosen depending on the needs of the business and its legal framework, it must be adapted to your business model.

Mainly it is important to understand that companies in Colombia are classified in four different ways, and this will depend on their:

  • Legal form
  • Capital ownership
  • Size
  • Economy


Regarding the types of companies according to their legal form, we have:


Sole proprietorship

In this type of company, the owner or, in other words, the person who has the legal capacity and obligations to answer for the company, must respond to the obligations and needs of the company with their assets.


Collective society

It refers to the type of business that is owned by more than one type of person. In the collective society all the partners must respond to the needs of the company with their assets, in return they will have a participation in the business management.



They refer to a non-profit company that has been created mainly to cover the social and economic needs of each of its owners, who in turn are workers or may even be clients or suppliers of the company.


Limited Partnership

It is a commercial company characterized by the existence of two types of partners: General partners and limited partners. The general partners are liable with all their assets for the results of the social operations (they have a statute similar to that of the collective partnership), and the limited partners are liable only up to the amount of their contribution to capital.

The advantages of this type of company are, in addition to the simplicity of the procedures and the administration, that the general partners can also attract the capital of others without them interfering in the management of the company. On the other hand, limited partners can be part of a simpler and less expensive partnership than the stock and limited liability companies.


Limited Companies

It is a company of a commercial nature, with a specific capital, made up of the shareholdings of the partners, with the great advantage that they will not personally respond to the corporate debts (the partner’s liability for the debts is limited to the contributions he has made), not even when the social patrimony is exhausted since they do not have subsidiary responsibility.


Stock Company

It is a commercial company of the capitalist type in which the capital stock is divided into shares (small parts of the capital) that can be freely transferred once the Company is registered in the Mercantile Registry.

The most obvious advantage is that shareholders are not liable for corporate debts with their personal assets (private assets), and on the other hand, there is the possibility of attracting outside capital through the issuance of bonds.


Criteria for choosing the legal form of your company

Since you already know the types of companies, depending on their legal form, you may wonder which one you should choose, following these criteria you can make a decision:

  • Type of activity: There are business sectors such as insurance or banks that force you to choose a specific legal form.
  • Number of shareholders: If a company has more than one partner, you must discard the sole proprietorship and opt for another option.
  • Starting economic investment: The incorporation of a company implies the contribution of an initial capital, while one in which the owner is autonomous does not imply any initial expense.
  • Bookkeeping: The bookkeeping obligations vary depending on the types of companies according to their legal form: The accounting of a self-employed person is (relatively) simpler than that of a company.


Don’t miss out on the benefits of business bookkeeping.


Setting up and registering companies in Colombia is a process that requires full attention and regulation, since this will define the approval of your economic activity before the different national entities, so it is important to leave the process in expert hands. Our experts at JLC ​​Auditors want to share with you the step by step you must follow so that your business or company complies with all the requirements established by law.


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