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Company

Arjun EP

Published on: July 6, 2020

Meaning of Company or Corporation

A company is an entity; law creates company and separates it from its owners.

It is a corporate body; it carries out certain activities for a particular purpose.

A group of persons contribute capital to form a corporation or company.

They are known as shareholders.

The shareholders have a limited liability up to their invested capital.

The nature of equity share is such that it is not returnable but transferable from one person to another.

A company is a voluntary association of a number of individuals.

They establish company for some common purpose of economic gain.

Different individuals establish corporation or company so that a large scale of capital can be raised.

From this capital, company produces mass production, it expanse business, it purchased fixed assets.

Limited company is the most popular form of business organization to do large business.

When sole trader or partnership business increases in the size and volume, it is difficult to handle them.

These two types of business suffer from unlimited liability as well as continuity of existence.

To remove these limitations, new types of business is developed; it is called a Joint Stock Company.

A joint stock company is popularly known as Limited Company or a Corporation.

In common language, company means group of persons associated together for some common purpose.

Company is an artificial being; so it is invisible, intangible and existing only in observation of law.

It is a voluntary association of persons.

It is formed for the purpose of some business profit with common capital.

Capital is divisible into transferable shares, possessing a corporate legal entity and a common seal.

Company collects capital by issuing shares to promoters and general public.

Shareholders can transfer shares from one person to another easily.

The shareholders elect the Board of Directors.

Board of Directors manages the company and they are responsible for shareholders.

Definitions

According to James Stephenson: “A company is an association of many person who contribute money or money’s worth to equity shares and employ it in some trade or business and who share the profits and losses arising there from.”

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Keep In Mind

The industrial revolution took place in England during the Eighteenth and the Nineteenth centuries, resulted in the modern factory system and thereby large-scale production.

The large-scale production required a huge amount of capital and professional management, which the sole proprietorship and the partnership forms of business organization failed to meet.

Therefore, the joint stock company came into existence.

It overcomes the limitations of the sole proprietorship and partnership and to facilitate large scale of production.

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