What Is the Definition of a Company?

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There are a lot of terminologies in the business world, some of which many feel they are already accustomed to. However, when did you last stop to think and answer the question, what is a company? You may be surprised to know that even for business owners, not many will find the right words or terms to describe it (and not just in layperson terms). So, if you have ever wanted to know more about what a company is and the types that exist, here’s a brief informative piece that should be helpful.

What Is a Company?


Depending on the country you’re based in, the term “company” can take on different meanings. In the UK, a company is a corporate or incorporated body registered under the Companies Act. It could either be a private or public company, limited or unlimited, a company limited by guarantee, a company that shares capital, or a community with a shared interest. In the U.S., a company is a corporation, association, joint-stock company, trust fund, or even an organized group of people that can either be incorporated or not.

Features of a Company

Most companies have to satisfy certain criteria before being identified as one. Some of the criteria and features include:

  • The company is treated as a legal artificial person. It has a unique legal name and bank accounts and has the right to own property or sue another legal entity.
  • The company is legally independent of its management and staff. For example, if some board members personally owe debts, the company will not be held responsible for that debt, and vice versa.
  • The company can only begin business and legal operations after going through the process of registration by the law. For example, an industrial curtain company would have to have a memorandum of association, board of directors, a legal name, a head office, a phone number, share prices and shareholders, and even more legal documentation applicable under the company’s ordinance act.
  • The company usually offers a service or product to customers. An industrial curtain company, for example, will sell custom industrial curtains to other companies looking to decorate their industrial space. Their clients will likely require industrial divider curtains, shower curtains, wind-proof curtains, vinyl curtains, industrial plastic curtain walls, and industrial doors.
  • The company usually has staff members. Start-ups tend to have less staff, but as a company grows, so does the number of employees, both permanent staff and general contractors. For example, a remodeling company in San Diego will likely be made up of San Diego remodeling pros and home-remodeling contractors with years of experience. They might also have a team of architects to cover the whole home remodel service in a timely manner.

Types of Companies

There are different types of companies, and they can be classified based on liability, shares, taxes, and control. Below are some examples.

Limited Companies

With a company limited by shares, the shareholders of a company wouldn’t be responsible for any liability beyond the share price they invested. Companies limited by guarantee are usually nonprofit organizations with only guarantors as members of the company.

Unlimited Companies

In such companies, the liability of each shareholder goes beyond their share price. For example, the shareholders of a construction company in Southern California may lose personal assets if the company owes debts. If any is a homeowner, such personal property would be up for grabs.

Companies That Are Classified Based on Membership

In a sole proprietorship, there is just one owner of the business. They take all the profits and bear any losses from the business.

A private company is one that doesn’t offer shares to the public. Their shares are limited to only close members. Companies like Koch Industries and Mars are perfect examples of some of the largest private companies in America.

Public companies actually advertise their shares and stock to the public. Members of the public are freely allowed to trade on stock and shares in the stock exchange market.

Understanding what a company is will help you take your own company to the next level.