Businesses can be classified in a variety of ways. Individuals seeking to establish one can decide what category suits them. We have discussed the sole trader and partnership as types of businesses. This article will focus on the company.
Definition of company
A company can be defined as a legal person formed by an association of persons with a clause and with a primary objective of making a profit or provides volunteering services.
In the United States, the legal definition is;
‘‘A company can be a corporation, partnership, association, joint-stock company, trust fund, or organized group of persons, whether incorporated or not, and (in official capacity) any receiver, trustee in bankruptcy, or similar official, or liquidating agent, for any of the foregoing.’’
The US sees the company as a firm. What is known as a company, in most countries, is called corporations in the United States. In fact, a company is a firm.
While British legal definition is as follows;
‘‘A company is a body corporate or an incorporated business organization registered under the companies act. It can be limited or unlimited company, private or a public company, company limited by guarantee or a company having a share capital, or a community interest company.’’
The definition in the British legal system is similar to that of Nigeria and most Africa countries.
The term company also means corporation except in the United States.
It is a legal person. Or a neutral or artificial person. A company is seen as a legal person. The term legal means it can sue and be sued in its name. If the name of the company is Tross LLC for example, Mr Michael can sue Tross LLC instead of the management. Also, Tross LLC may sue Mr Michael.
It is as a result of an association of persons. Group of individuals can come together to form a company. There are generally two types of companies to this respect. Limited and public companies.
Limited companies are formed by a minimum of two persons and a maximum of 50. While public company’s minimum persons that can be formed it is 7 persons but has no specific maximum number of individuals.
It usually comes with an object clause. Every company has an object clause. That is the extent to which it can operate. A company registered as a bank can only perform banking businesses. It can’t start selling drinks. When a company goes against its object clause, it is referred to as ultra vires.
Profit motive or volunteering goal. A company may be established to make a profit or to provide volunteering services (such as charity and churches). In these instances, companies can be categorized into two types. Companies limited by shares and that limited by guarantee.
Most charity or volunteering organizations registered as companies are registered as companies limited by guarantee. They are not established to make a profit but to provide services to mankind.
It has perpetual succession. Corporate bodies are established with perpetuity. That means it can exist for as long as possible. The founders may die and the company will continue doing business. This key feature differentiates a company from any other type of business.
When the founders die, there is a continuous succession by others who have bought shares or have guaranteed the continuity of the company. Only in the event when the company can no longer meet the long term obligations that the court or the current owners may decide to liquidate it.
To wrap it up, the company is a legal entity with perpetual existence. This differentiates it from another business type. Running a company can either be as a limited or public company. Those companies without the aim of earning profit are referred to as companies limited by guarantee.