Classifying Firms
Firms are classified along four independent axes — and every combination exists.
By size (EU definition, employee headcount):
| Class | Employees |
|---|---|
| Micro | fewer than 10 |
| Small | 10–49 |
| Medium | 50–249 |
| Large | 250 or more |
Together, micro, small, and medium firms are the SMEs — over 99% of all EU businesses.
By sector: primary (extracting from nature: farming, mining), secondary (transforming: manufacturing, construction), tertiary (services: retail, banking, consulting).
By ownership: private (held by individuals or investors), public (owned by the state), and mixed.
By legal form — the axis with the sharpest consequences:
- Sole proprietorship: one owner, full control, unlimited liability — personal assets answer for business debts.
- Partnership: several owners sharing management and (typically) unlimited liability.
- Limited liability company (S.L.): capital divided into participations; owners risk only what they invested.
- Corporation (S.A.): capital divided into freely transferable shares; suited to raising large capital.
The key trade-off: unlimited-liability forms are simple and cheap to create, but one bad year can reach the owner's house. Limited liability protects personal wealth — at the price of formalities, minimum capital, and disclosure duties.
Tip: The four axes are independent — a micro-sized, tertiary-sector, privately-owned S.L. is a perfectly normal combination. Classify along each axis separately.
Common pitfall: In news English a "public company" is one listed on a stock exchange; in this classification, public ownership means owned by the state. Same word, different axis.