A company, abbreviated as co., is a legal entity made up of an association of people, be they natural, legal, or a mixture of both, for carrying on a commercial or industrial enterprise. Company members share a common purpose, and unite to focus their various talents and organize their collectively available skills or resources to achieve specific, declared goals. Companies take various forms, such as:
- voluntary associations, which may include nonprofit organizations
- business entities with an aim of gaining a profit
- financial entities and banks
A company or association of persons can be created at law as a legal person so that the company in itself can accept limited liability for civil responsibility and taxation incurred as members perform (or fail to discharge) their duty within the publicly declared "birth certificate" or published policy.
Companies as legal persons may associate and register themselves collectively as other companies – often known as a corporate group. When a company closes, it may need a "death certificate" to avoid further legal obligations.
Meanings and definitions
One can define a company as an "artificial person", invisible, intangible, created by or under law, with a discrete legal personality, perpetual succession, and a common seal. Companies remain unaffected by the death, insanity, or insolvency of an individual member.
The English word company has its origins in the Old French term compagnie (first recorded in 1150), meaning a "society, friendship, intimacy; body of soldiers", which came from the Late Latin word companio ("one who eats bread with you"), first attested in the Lex Salica (c. 500 CE) as a calque of the Germanic expression gahlaibo (literally, "with bread"), related to Old High German galeipo ("companion") and to Gothic gahlaiba ("messmate").
Semantics and usage
By 1303, the word referred to trade guilds. Usage of the term company to mean "business association" was first recorded in 1553, and the abbreviation "co." dates from 1769.
- private companies limited by guarantee
- companies without share capital (often non-profit entities)
- private companies limited by shares - the most common form of company
- public limited companies - companies, usually large, which are permitted to (but do not have to) offer their shares to the public, for example on a stock exchange
In the United States, a company may be a "corporation, partnership, association, joint-stock company, trust, fund, or organized group of persons, whether incorporated or not, and (in an official capacity) any receiver, trustee in bankruptcy, or similar official, or liquidating agent, for any of the foregoing". In the US, a company is not necessarily a corporation.
See also types of business
- A company limited by guarantee. Commonly used where companies are formed for non-commercial purposes, such as clubs or charities. The members guarantee the payment of certain (usually nominal) amounts if the company goes into insolvent liquidation, but otherwise, they have no economic rights in relation to the company. This type of company is common in England. A company limited by guarantee may be with or without having share capital.
- A company limited by shares. The most common form of the company used for business ventures. Specifically, a limited company is a "company in which the liability of each shareholder is limited to the amount individually invested" with corporations being "the most common example of a limited company". This type of company is common in England and many English-speaking countries. A company limited by shares may be a
- A company limited by guarantee with a share capital. A hybrid entity, usually used where the company is formed for non-commercial purposes, but the activities of the company are partly funded by investors who expect a return. This type of company may no longer be formed in the UK, although provisions still exist in law for them to exist.
- A limited liability company. "A company—statutorily authorized in certain states—that is characterized by limited liability, management by members or managers, and limitations on ownership transfer", i.e., L.L.C. LLC structure has been called "hybrid" in that it "combines the characteristics of a corporation and of a partnership or sole proprietorship". Like a corporation, it has limited liability for members of the company, and like a partnership it has "flow-through taxation to the members" and must be "dissolved upon the death or bankruptcy of a member".
- An unlimited company with or without a share capital. A hybrid entity, a company where the liability of members or shareholders for the debts (if any) of the company are not limited. In this case doctrine of a veil of incorporation does not apply.
Less common types of companies are:
- Companies formed by letters patent. Most corporations by letters patent are corporations sole and not companies as the term is commonly understood today.
- Charter corporations. Before the passing of modern companies legislation, these were the only types of companies. Now they are relatively rare, except for very old companies that still survive (of which there are still many, particularly many British banks), or modern societies that fulfill a quasi-regulatory function (for example, the Bank of England is a corporation formed by a modern charter).
- Statutory companies. Relatively rare today, certain companies have been formed by a private statute passed in the relevant jurisdiction.
Note that "Ltd" after the company's name signifies a limited company, and "PLC" (public limited company) indicates that its shares are widely held.
In the legal context, the owners of a company are normally referred to as the "members". In a company limited or unlimited by shares (formed or incorporated with a share capital), this will be the shareholders. In a company limited by guarantee, this will be the guarantors. Some offshore jurisdictions have created special forms of offshore company in a bid to attract business for their jurisdictions. Examples include "segregated portfolio companies" and restricted purpose companies.
There are, however, many, many sub-categories of types of company that can be formed in various jurisdictions in the world.
Companies are also sometimes distinguished for legal and regulatory purposes between public companies and private companies. Public companies are companies whose shares can be publicly traded, often (although not always) on a stock exchange which imposes listing requirements/Listing Rules as to the issued shares, the trading of shares and future issue of shares to help bolster the reputation of the exchange or particular market of an exchange. Private companies do not have publicly traded shares, and often contain restrictions on transfers of shares. In some jurisdictions, private companies have maximum numbers of shareholders.
A parent company is a company that owns enough voting stock in another firm to control management and operations by influencing or electing its board of directors; the second company being deemed as a subsidiary of the parent company. The definition of a parent company differs by jurisdiction, with the definition normally being defined by way of laws dealing with companies in that jurisdiction.
Compare a definition of a corporation:
Pride, William M.; Hughes, Robert J.; Kapoor, Jack R. (2009) . "4: Choosing a form of business ownership". Business. CengageNOW Series (10 ed.). Mason, Ohio: Cengage Learning. p. 116. ISBN 9780324829556. Retrieved 20 Apr 2019.
Perhaps the best definition of a corporation was given by Chief Justice John Marshall in a famous Supreme Court decision in 1819. A corporation, he said, 'is an artificial person, invisible, intangible, and existing only in contemplation of the law.' In other words, a corporation [...] is an artificial person, created by law, with most of the legal rights of a real person.
- 12th century: Harper, Douglas. "company". Online Etymology Dictionary.
- Compare: Harper, Douglas. "company". Online Etymology Dictionary. - '[...] the word having been used in reference to trade guilds from late 14c.'
- Compare: Harper, Douglas. "company". Online Etymology Dictionary. - 'From late 14c. as "a number of persons united to perform or carry out anything jointly," which developed a commercial sense of "business association" by 1550s, the word having been used in reference to trade guilds from late 14c.'
- Compare: "co". Oxford English Dictionary (3rd ed.). Oxford University Press. September 2005. (Subscription or UK public library membership required.) - "1759 Compl. Let.-writer (ed. 6) London: Printed for Stanley Crowder, and Co."
- Compare: Harper, Douglas. "co". Online Etymology Dictionary. - 'by 1670s as an abbreviation of company in the business sense, indicating the partners in the firm whose names do not appear in its name. Hence and co. to indicate "the rest" of any group (1757)'.
- Companies Act 2006, Section 1
Garner, Bryan A., ed. (2009) . "company". Black's Law Dictionary. Black's Law, 9th Edition. 1 (9 ed.). St. Paul, Minnesota: West Publishing, Inc. p. 318. ISBN 9780314199492. Retrieved 20 Apr 2019.
2. A corporation, partnership, association, joint-stock company, trust, fund, or organized group of persons, whether incorporated or not, and (in an official capacity) any receiver, trustee in bankruptcy, or similar official, or liquidating agent, for any of the foregoing. Investment Company Act 2(a)(8)(15 USCA 80a-2(a)(8)).
- Black's Law and lee Dictionary. Second Pocket Edition. Bryan A. Garner, editor. West. 2001.
- "Company legal definition of company". TheFreeDictionary.com.
company [:] any formal business entity for profit which may be a corporation, a partnership, association or individual proprietorship. Often people think the term "company" means the business is incorporated, but that is not true. In fact, a corporation usually must use some term in its name such as "corporation," "incorporated," "corp." or "inc." to show it is a corporation.
- Companies Act 2006
- root. "Limited Liability Company (LLC) Definition - Investopedia". Investopedia.
- "BBC Bitesize - GCSE Business - Forms of business ownership - Revision 3". BBC Bitesize. Retrieved 2018-08-31.
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