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Company
Definition:
A company is a legal entity that is owned and controlled by shareholders. It is a separate and distinct entity from its shareholders, with its own separate legal existence.
Types of Companies:
- Public Companies: Shares are traded on a public stock exchange.
- Private Companies: Shares are not traded publicly.
- Limited Liability Companies (LLCs): Owners have limited liability for their investment.
- Corporations: Separate legal entity from shareholders.
- Societies: Members have shared ownership and control.
Key Characteristics:
- Artificial Person: Companies are legal entities that exist separate from their shareholders.
- Ownership: Shareholders own shares in the company.
- Limited Liability: Shareholders have limited liability for their investment.
- Governance: Companies are governed by a board of directors and officers.
- Profit and Loss: Companies can generate profit or loss, which is distributed to shareholders.
- Common Stock: Publicly traded companies have common stock, which represents ownership.
Formation and Structure:
- Memorandum and Articles of Association: Required documents for company formation.
- Shareholders: Owners of company shares.
- Board of Directors: Elected by shareholders to oversee company management.
- Officers: Appointed by the board to carry out specific duties.
- Meetings: Regular meetings held by shareholders to approve decisions.
Examples:
- Ford Motor Company (public company)
- Tesla Inc. (public company)
- Apple Inc. (private company)
- Microsoft Corporation (public company)
Advantages:
- Limited liability for shareholders
- Ability to raise capital
- Ability to operate at a large scale
- Access to resources and markets
Disadvantages:
- Complex governance structure
- Potential for conflict between shareholders
- Limited ownership flexibility
- Cost of formation and maintenance
- Tax implications