Meaning of Companies And Kinds Of Companies

Meaning      ;
A company is a legal entity formed by a group of individuals to engage in business activities, typically with the aim of generating profit.
Here are the Characteristics features of a company:

Characteristics (Features):
Separate Legal Entity:
A company is considered a separate legal entity from its owners, enabling it to enter into contracts, own assets, and incur liabilities in its own name.
Limited Liability: Shareholders’ liability is limited to the extent of their investment in the company, protecting their personal assets from business debts and obligations.
Management Structure: Companies have a defined management structure consisting of directors, who are appointed by shareholders to oversee the company’s operations and make strategic decisions.
Transferability of Ownership: Ownership of a company can be easily transferred through the buying and selling of shares, providing liquidity to shareholders.
Separate Property: A company’s assets and liabilities are separate from those of its shareholders, ensuring that creditors cannot claim shareholders’ personal assets to satisfy business debts.
Q . What is meant by a ‘share’? Give any two differences between ‘preference shares’ and ‘equity shares’. CBSE 2018  (PYQs)

Kinds Of Company

1. Private Limited Company:
Limited liability: The liability of members (shareholders) is limited to the extent of their shareholdings.
Restricted ownership: Ownership is limited to a small group of individuals (up to 200 shareholders).
Restrictions on share transfer: Shares cannot be freely traded or transferred to the public.

2. Public Limited Company:
Limited liability: Members’ liability is limited to the amount unpaid on their shares.
Public ownership: Shares are freely transferable, and ownership is open to the public.
Minimum capital requirement: Must have a minimum paid-up capital as per regulatory requirements.

3. One Person Company (OPC):

Sole proprietorship: Owned and managed by a single person.
Limited liability: The sole member has limited liability, similar to shareholders of other companies.
No requirement for minimum capital: Can be formed with any amount of capital.

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