How are companies classified according to their activity?

In the organizational world, companies are divided into several categories according to their economic activity. In this article, we will explain how organizations are classified to make it easier for you to start a business in Colombia.

Regarding the type of capital

Companies that are incorporated in a country are divided into three types. These are:

• Private companies
• Public companies
• Joint ventures

• Private businesses

They are those that are managed by private capital, that is, by investors and entrepreneurs who invest their money to set up a company in Colombia for profit.

These types of companies are required by the Colombian State to pay taxes depending on the type of earnings they receive in the fiscal year. At the same time, the DIAN (tax collecting entity) evaluates the rate to pay in relation to the size of the organization.

It is important to mention that, although private companies do not obtain profits in a given year, they are required to declare Income Tax in order to prove DIAN that there was no profitability in the immediately preceding year.

• Public enterprises

They are those companies that are managed directly by the State, unlike the private ones, these are exempt from paying taxes and their economic activity is not for profit, but for the purpose of offering a good or service that is capable of satisfying the needs of a community.

It should be noted that these companies can be transferred to private capital if necessary. Generally, when they go bankrupt, the decision is made to sell them to a private consortium in order to reduce public spending and stop injecting money into organizations that are not functional for the country.

• Mixed companies

They are those companies that maintain both private and public capital. These types of companies, although not quite common, usually appear when the state establishes agreements with a private company to achieve a joint project.

For example, the oil industry in several countries tends to be part of the assets managed by the State, but the internal administration of these companies is managed by private capital.

It may interest you: What companies are set up in Colombia?

Regarding the economic sector

In relation to the economic sector, reference is made to the type of activities that companies carry out for profit. These are:

Commercial

This sector includes companies that market some type of product. These types of organizations are not producers but buy merchandise from other companies and then resell them in their commercial establishments.

Industrial

Industrial companies are those that manufacture their respective products and sell them on the market, either to private customers or to other companies. Generally, it is the latter that end up marketing the products to the general public.

Some areas where this type of industry participates are:

• Agricultural
• Machinery
• Construction
• Pharmacist
• Liquors
• Electronic equipment

Services

They consist of those companies that offer certain service to the population. The best known are:

• Water
• Electricity
• Internet
• Telephony

It is important to note that the people who make use of these services are known as users; and they must pay a fixed rent that tends to be monthly. On the other hand, it should be noted that each type of company handles a different tax rate in proportion to the profit margin received.

According to the size of the companies

Regional companies

They are those companies that only work in certain localities of a country. Often, they operate in no more than one city.

National companies

They are those companies that have headquarters nationwide. They handle much larger capital and tend to offer goods and services with a significant demand in the market

Multinational companies

They are those companies that have headquarters in more than one country. They handle considerably large profit rates, and their strategic business unit is much larger.

As you can see, understanding the classification of companies is an essential resource that all entrepreneurs must know if they want to start a business. If you would like to start a company in Colombia, you should also know that each company is regulated differently by state entities.