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The best way depends on how high the companions levels are. Note that does not mean that you should stop using the previous ways, just that you should prioritize another one:
1) Low levels. Most companions can't do much on their own. The best way is to throw quest experience at them. The quest experience award is once given to the player, and then split between all companions equally.
Some quests appear at set intervals (peace, cows, grain, etc.) make sure that you check for them once per day.
Other quests appear when there is an issue (free lord, kick bandits out, catch bandits who robbed travelers, etc.) Always pick those out, especially the one about the bandit lair. Once you know exactly where the lair appears, you can solve it many times in quick succession.
And finally, at least one quest is always available.
2) Mid levels. Companions may be sturdier, but you probably do not have the cash to equip them properly, because you have been starting businesses. Use your character to solo the enemy parties, and after the battle there will be shared experience for your companions. Note that if you have mortal troops, they too will get experience, so the companions will get less.
The best targets are foot soldiers of a single type, so that you can draw their attention and keep them away from companions. Sea raiders, infantry deserters, and anyone you think you can solo without trouble. As an added bonus the looted equipment can go to equip those companions.
3) High levels. Companions are all well equipped, in full plate for combat beasts, and heraldic mail with tabards for the eggheads. Now they can earn their own experience. There are enemies that simply do not have the weapons to deal with them, so let the enemy focus on your character, run away so that they spread out, and have your companions charge.
In some mods, there are no safe enemies. Native's looters, most regional bandits, and even some faction troops are safe... but there are mods like Gekokujo, Phantasy and With Fire and Sword, where even the lowliest scum can get their grubby little hands on a firearm or fireball. There, you may be better off equipping even your melee beasts with high end ranged weapons or magic, and let them shoot at the morons chasing you. Example.
When you follow those, you get companions in the 30+ levels. Some can take 10 elite enemies per fight down, others have 10s in party skills, and are deadly with a crossbow/gun/sling/fireball.
Some people also recommended giving them horses and lances, but from by experience, AI is kinda dinky when it comes to lances. If you wanna try this route, make sure you hand them a reasonably swift lances (ie. NOT Great Lance) + one-hander so they can fend themselves off in prolongued horseback combat.
As for making companions useful in combat, throw lots of points in STR, Power Draw and Archery, then sit back and watch your companions plowing through enemy groups. Later on you can migrate towards Power Strike and hand them Big Scary Bashers.
I like to turn Eggheads (as Tuidjy put it) into Rhodokian Sharpshooters: Heavy armor, big board shield and crossbow+bolts. While crossbows are slower, they won't require intense focusing on them, just enough STR to equip the x-bow -> You can freely toss your skillpoints in Party skills.