1 What is Company?
After the concept of partnership ,when business grows its activities become more complicated. People want to earn more and more so when greater number of people invest money then there may be more chances to expand the limit of profit.
So according to concept of company , it is more formal business enterprise for profit where investment is collected through issuing shares to number of people (members of company) and also to general public (shareholders).
1.1 Company a separate legal entity
Unlike partnership and sole readership, company is a separate legal entity it means it has its own identity with individual rights and obligations given as follows
- Companies can be registered through their own names as “corporate Groups”
- Companies are separate from its members and shareholders.
- Companies can enter individually into a contract with other company or any other party at the name of company.
- Companies are individually held responsible toward the debts and liabilities of creditors.
2 Types of companies
Companies can be divided into different types on the basis of ownership, formation, liability and control.
On the basis of ownership companies may be of two categories
- Government oriented companies
- Non-government oriented companies
When more than 51% shares are subscribed by government, these companies are known as government oriented companies and if less than 51% they are known as non-government (public or private) oriented companies
On the basis of formation, companies can be divided into following types
- Public company
- Private company
2.3 Private company
- A company which prohibits the right to issue shares to general public
- Its minimum paid up share capital is one lak rupees.
- Maximum number of members limited to 50 only employees of the company
- These are generally small entities
- There are no strict rules for its formation and further regulation.
2.4 Public company
- A company which is not private known as public company
- Public companies registered through registration process and its shares are publically traded.
- Its minimum paid up share capital is five lakh rupees
- Minimum seven members required for its registration
- The public company must hold a registrar trading certificate.
- There must be one member and two directors.