What is Company?
A company is a legal entity formed under the laws of a particular jurisdiction, typically to engage in commercial activities, conduct business operations, and generate profits. It is an organisation that has its own legal personality, separate and distinct from its owners (shareholders) and managers.
Features of a company include:
- Legal Entity: A company is a separate legal entity distinct from its owners (shareholders), meaning it can enter into contracts, own property, incur debts, and sue or be sued in its own name.
- Limited Liability: Shareholders of a company typically have limited liability, meaning their personal assets are protected from the company’s debts and liabilities. Their liability is generally limited to the amount of their investment in the company.
- Perpetual Existence: A company has a perpetual existence, meaning its existence is not dependent on the life of its shareholders or directors. It can continue to exist even if shareholders change or pass away.
Difference between Company and Firm
Company and Firm refer to business entities engaged in commercial activities. Company typically refers to a legally registered and incorporated business entity; whereas, firm is a broader term that can encompass various types of business organisations.