A legal entity, allowed by legislation, which permits a group of people, as shareholders, to apply to the government for an independent organization to be created, which can then focus on pursuing set objectives, and empowered with legal rights which are usually only reserved for individuals, such as to sue and be sued, own property, hire employees or loan and borrow money.
Also known as a corporation.
The primary advantage of a company structure is that it provides the shareholders with a right to participate in the profits (by dividends) without any personal liability (the company absorbs the entire liability of the business).
The word company is often mistakenly used to refer generically to any for-profit business: a sole proprietorship, a partnership or a corporation. This promotes confusion and has led many jurisdictions to prefer and defer to the term corporation.
Some jurisdictions such as England, continue to use the term company when referencing the legal entity other refer to as a corporation.
In Gower's Principles of Modern Company Law, a 1997 English law book, the author notes that the generic definition of the word company is:
"... an association of a number of people for some common object or objects....
"(I)n common parlance, the word company is normally reserved for those associated for economic purposes; i.e. to carry on a business for gain.
"English law provides two main types of organisation for such associations: partnerships and companies. Although the word company is colloquially applied to both, the modern English lawyer regards companies and company law as distinct from partnerships and partnership law."
- Davies, Paul, Gower's Principles of Modern Company Law, 6th Ed., (London: Sweet & Maxwell, 1997), page 3.
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