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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

Disclaimer