A company is a legal entity that is separate from its owners. It is created by law and has its own rights and liabilities. Companies can be formed by one or more persons and can be either private or public.
Characteristics of a Company
The following are some of the characteristics of a company:
- It is a legal entity. This means that the company has its own legal personality, separate from its owners.
- It has perpetual succession. This means that the company continues to exist even if its members change.
- It has a common seal. This is a physical stamp that is used to authenticate the company’s documents.
- It can sue and be sued in its own name.
- It can own property in its own name.
- It is liable for its own debts. The owners of the company are not personally liable for the debts of the company.
Types of Companies
There are two main types of companies: private companies and public companies.
- Private companies are companies that are not allowed to offer their shares to the public. They are limited to a maximum of 50 members.
- Public companies are companies that are allowed to offer their shares to the public. They have no limit on the number of members they can have.
Multiple Choice Questions
- Which of the following is not a characteristic of a company?
- It is a legal entity.
- It has perpetual succession.
- It has a common seal.
- It is liable for its own debts.
The answer is it has a common seal. The common seal is not a characteristic of a company. It is a feature of a corporation.
- A company is formed by two persons. Is it a private company or a public company?
It is a private company. Private companies are limited to a maximum of 50 members.
- A company offers its shares to the public. Is it a private company or a public company?
It is a public company. Public companies are allowed to offer their shares to the public.
Answers
- It has a common seal.
- A private company.
- A public company.