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The Difference Between The Institution and The Company

There are many differences between the institution and the company according to many criteria, as it can be considered that every institution is a company, but the opposite cannot be considered true. Before we talk about these differences, we must define both.

What is the company?

A company is any commercial entity that provides goods or services to customers, and its ultimate goal must be to make a profit. It is worth mentioning that all institutions fall under the name of companies, but not all companies fall under the category of institutions. Their organizational structures and each has its advantages and disadvantages in terms of business operations and tax purposes.

What is the institution?

A institution is defined as a legal commercial entity separate from its owners, in which its ownership is sold in the form of shares that are offered for general trading to the public, and the transferability of ownership from one person to another is one of its main advantages, and individuals who own shares in the company are considered owners in it, and it is worth mentioning that ownership does not necessarily mean management. Most institutions elect a board of directors that manages their daily operations and attend periodic meetings, and the owners of the company must submit separate tax returns because the institution is a separate entity from them so that it has legal incorporation documents that are much more difficult than corporate structures, and one of the things that is unique to institutions is their exposure to paying taxes twice, once on its profits and once on salaries, i.e. once on the level of the institution and the other time on the level of individuals.

The following are the most important differences between the institution and the company:

1- Ownership structure:

Institution: The institution is owned by an unlimited number of shareholders, and the exchange and transfer of ownership in the foundation is easy.

Company: The Company is owned by a limited number of members or shareholders. The ease of transferring and exchanging ownership of the company depends on the nature of the business.

2- Capital size:

Institution: The Institution requires a minimum amount of capital.

Company: The Company does not require a minimum capital.

3- Names and terms:

Institution: The Institution is called either (Inc.) or (Corp).

Company: A company can be a limited liability company (LLC), public limited liability company (PLLC) or private.

4- Administration and hierarchy:

Institution: The institution is characterized by the presence of an administrative structure different from the company. Due to its larger size, there is a board of directors in the organization in order to supervise the employees and executives. Company: The management of the company is for one member or a group of members or equal owners.

5- Accounts, records and taxes:

Institution: The institution maintains very detailed and comprehensive records, as profits or losses are not passed on to the individual tax returns of the owner or shareholder members, which leads to double taxation, meaning that the profits of the foundation are taxed twice.

Company: A company keeps few records and accounts, as profits or losses are passed onto the individual tax returns of the owner or shareholder members of the corporation.

6- Legal responsibilities:

Institution: The institution is a legal entity separate from the owners or shareholders.

The company: the shareholders of the company bear the legal responsibility in certain cases; as frauds.

7- Proper and size:

Institution: The institution is characterized as a large entity, and it manages large business projects, and the structure of the institution is applicable when it is listed on the market, and its shares become available for trading.

The company: The Company is characterized as a small entity, and it manages small business projects, but the company's activity is not limited within the country, but rather it can have foreign trade and a registered presence in several countries of the world.

8- Transparency:

Institution: The institution offers a high level of transparency, this is due to strict regulatory requirements.

Company: The Company offers lower levels of transparency, this is due to flexible regulatory requirements.

9- Legal agreements:

Institution: The institution has to fulfil many agreements and legal obligations, this is in order to establish and continue its existence.

Company: A company has fewer of these legal requirements.

10- Meetings attendance:

Institution: It is considered a mandatory order for the shareholders of the Corporation on a regular or annual basis.

Company: It is not mandatory for the owners of the company.

The ownership structure differs between the institution and the company due to the difference in size between them, as well as the different responsibilities and legal consequences borne by the shareholder members of the company or institution, because the matter is related to several factors such as the number of shareholders and secured or unsecured creditors, as for names and terms, the meanings of names and terms applied to certain aspects differ between the company and the institution. This is because it affects how it operates and the method of circulation, in addition to that, the institution and the company differ in the way the tax law is applied to them, because of the difference in profits, revenues, expenses, and economic status of both.


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