Why Do Companies Exist – All You Need To Know

Why Do Companies Exist

The most straight-forward answer to why companies exist is the ‘supply and demand’ analogy. If the public require a service or item, someone will supply it somewhere.

There are of course those who have new ideas and inventions. These companies exist because they believe in their product(s) and know that at least some of the public will too.

There will always be people who will offer a service or product at a lower cost (off the back of a lorry), but most of the public tend to not trust these individuals. However, if they have a company or are affiliated to a company, it inspires a trust to the buyer.

The reason for the above is that a ‘Company’ owes a duty of care and can be relied upon to either exchange products or update services etc.

There are many other reasons that companies exist…read on.

Generating and Maintaining Employment

Our World works in such a way as that everything costs money. In order to obtain a service or product you need to pay. Businesses employ people and pay them a wage for their work…this is what makes the world go round.

All businesses create jobs, even a small entrepreneurship creates a job for the individual. Providing the business has planned properly and makes money, these jobs are sustained and become more lucrative for both the business owner and the employees.

Developing Employees

Most employers offer a pathway for those employees who wish to move upwards. Although it might not always feel like it, employees are constantly learning on the job. This in itself is an invaluable experience which, for the employee, could lead to a complete change in lifestyle and job satisfaction.

There are usually courses for employees, some will be for everyone – like health and safety, fire drills and diversity. Other courses are usually optional and include learning about different areas of the business.  Either way, they are all educational in their own right and this is an integral part of business (and ties in with ‘maintaining’ employment).

Paying Taxes

Most countries could not survive without the input from the private business taxes. Every part of a business is taxed, including the wages paid to the employees.

Private business taxes go some way to funding ‘public’ companies. This means that if there were no private companies, there would be no public ones either.

Some tax bills are going to be extremely high for large multi-national companies. However, if their tax bill is high, then their profits are higher!

Paying taxes is an integral part to why businesses are so essential to the nation.

Research and Development

Any business is going to want to keep current and supply and update their offerings on a regular basis. To be able to do this they are constantly researching their products and services. When they find a new anomaly, they will develop what they have to get over it. This is a repetitive cycle for the life of the product/service.

Without Research and Development, the world would be stuck in a rut and many of the standard items we use today would not be here. Research and Development costs money as there is often no end result…businesses invest heavily in it and it affects every part of everyone’s lives.

Create Wealth

This is an obvious one. However, you have to have taken a chance to be able to reap the rewards of a successful company. It might be that you invested in it, or you worked for a lower salary whilst it was a fledgling business.

As a company becomes successful it will impact on anyone who has taken the chance on it at the beginning, often creating a large dividend for them. If they reinvest, in the same business or another completely separate one, the wealth is spread and thus more people have a little more money in the bank.

A good employer will also share a good return on business with their employees by offering a bonus, which creates extra money for more people.


An individual will have an idea. They may need investment, they may need premises. If someone has premises and another person has the cashflow the best course of action is to create a business together – rather than one person paying rent and paying back a loan.

Collaboration is the reason that many businesses are formed. You don’t necessarily have to be passionate about a product to be able to see its worth. However, individuals who collaborate to form a business need to be extremely clear about their roles before embarking as internal disagreements can be very counter-productive.


Many companies are formed to address an issue with a particular ‘unjustness’ in the World. There are many many charities these days which rely on the good-will of others to help the less fortunate.

Charities have to be registered, so although they are a business, they get certain tax benefits. These types of company exist through necessity and compassion.

The people who work for charities often do so voluntarily. However, there are certain parts of the business which have paid employees. A charity is run like a business and is usually a vocation for the various employees.


Companies give both the owners and the employees a purpose. A reason to get up in the morning, a reason to go for a drink on Friday night…many other reasons. The purpose is better supported when the mission statement of the company is known by all the staff – and consistently worked towards (don’t say it to sound good…say it and mean it).

There is a sense of belonging and loyalty which should go from the top down in an organisation. It gives meaning to life, without taking life over.

Final Decision

If you are thinking about starting a company, you need to understand that you must take it seriously from the beginning. Read up on how to start a business and put all steps in place before even thinking about starting. Be confident in what you are selling and do not be tempted to start too soon.

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