Company Facts for Kids

A modern office building in Münster, Germany. Many companies have offices like this!

An office building of Nokia Corporation in Hervanta, Finland. Nokia is a famous technology company.

A company is like a special group or organization that has a clear goal. It can be made up of people, or even other companies, working together. Companies are often created by law, which gives them their own "legal personality." This means the company can do things like own property, make contracts, and even be responsible for its own actions, separate from the people who run it.

Over time, companies have developed some key features:

They have a separate legal identity.
Their owners usually have "limited liability," meaning they are only responsible for the money they invested, not all the company's debts.
Their ownership can be easily shared or transferred through shares.
They are owned by investors.
They have a clear management structure.

Companies can take many forms. Some are nonprofit organizations, like charities, that don't aim to make money. Others are business entities that focus on making profit by selling things or offering services. There are also financial companies, banks, and even educational groups that are structured like companies.

When a company is set up, it becomes a legal person. This helps protect the people involved because the company itself is responsible for its duties. If a company stops operating, it might need to be officially closed down, which is called liquidation. Sometimes, several companies can join together to form a bigger corporate group.

What is a Company?
- Where the Word "Company" Comes From
Companies Around the World
Types of Companies
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What is a Company?

A company can be thought of as an "artificial person." It's not a real person, but the law treats it like one. It's invisible and you can't touch it, but it has its own legal rights and responsibilities. A company can keep going forever, even if its individual members or owners change, get sick, or leave.

Where the Word "Company" Comes From

The word "company" comes from an old French word, compagnie, which meant "society" or "friendship." It originally came from a Latin word meaning "one who eats bread with you," suggesting people who share meals and work together.

By the 1300s, "company" was used to describe trade guilds, which were groups of skilled workers. Later, in the 1500s, it started being used for "business associations." The short form "co." began in the late 1700s.

Companies Around the World

Companies operate differently in various countries, but the basic idea of a group working towards a goal remains the same.

Companies in China

In China, many companies are run or supported by the government. There are also many foreign companies and those that focus on exporting goods. Chinese law defines companies mainly as "limited liability companies" and "joint-stock limited companies."

Companies in the United Kingdom

In the United Kingdom, a company is a business that is officially registered under their company laws. Common types include:

Private companies limited by guarantee: Often used for non-profit groups like clubs or charities. Members promise to pay a small amount if the company faces financial trouble.
Private companies limited by shares: This is the most common type for businesses. Owners (shareholders) are only responsible for the money they invested.
Public limited companies: These are usually larger companies that can offer their shares to the public, often on a stock exchange.

In the UK, a partnership (where two or more people run a business together) is not legally a company, but people might sometimes call it a "firm."

Companies in the United States

In the United States, the word "company" can mean many things. It doesn't always have to be a corporation. For example, a company could be a partnership, an association, or even a group of people working together, whether they are officially incorporated or not.

Types of Companies

There are several main types of companies, each with different rules about ownership and responsibility.

A company limited by guarantee (CLG): This type is often used for clubs or charities. The members promise to pay a certain amount if the company goes out of business, but they don't own parts of the company like shareholders do. This is common in England.

A company limited by shares: This is the most common type for businesses. In this kind of company, the owners (called shareholders) are only responsible for the money they put into the company. This means if the company has debts, the shareholders won't lose more than their investment. This type is popular in England and many other English-speaking countries. These can be publicly traded (meaning anyone can buy shares) or privately owned (shares are not sold to the public).

A limited liability company (LLC): This type of company is found in some parts of the United States. It's a mix between a corporation and a partnership. Like a corporation, the owners have limited responsibility for the company's debts. Like a partnership, the profits and losses usually pass directly to the owners for tax purposes.

An unlimited company: In this less common type, the owners or shareholders are fully responsible for all the company's debts. This means their personal assets could be at risk if the company owes money.

Less common types of companies include:

Companies formed by letters patent: These are very old types of corporations, often for a single person holding an office.
Royal charter corporations: These were the main type of company in medieval Europe. Today, they are rare, mostly for very old companies like some British banks, or modern groups that have a special public role.
Statutory companies: These are companies created by a specific law passed by a government.

When you see "Ltd" after a company's name, it means it's a limited company. "PLC" (public limited company) means its shares can be bought and sold by the public.

The owners of a company are usually called "members." If a company has shares, the members are the shareholders. If it's a company limited by guarantee, the members are the guarantors.

Companies are also often divided into public companies and private companies for legal reasons. Public companies can sell their shares to anyone, often on a stock exchange. Private companies do not sell shares to the public and often have rules about who can own their shares.

A parent company is a company that owns enough shares in another company to control it. The company it controls is called a subsidiary. The exact definition of a parent company can vary depending on the laws of each country.

Images for kids

A modern corporate office building in Münster, North Rhine-Westphalia, Germany
An office building of Nokia Corporation in Hervanta, Tampere, Finland

Company facts for kids

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