Company facts for kids

A modern office building for a company in Münster, Germany.

An office building of Nokia in Tampere, Finland.

A company is like a special group or organization that is recognized by law. It can be made up of people, other companies, or a mix of both. These groups come together with a clear goal in mind. Members of a company share a common purpose and work to achieve specific, declared aims.

Over time, companies have developed certain features. These include being a separate legal entity, having limited liability, and allowing shares to be easily bought and sold. They also have owners who invest money and a management team that runs things. A company is created by the government, which gives it the special permission to exist as a separate legal body.

Companies can take many different forms, such as:

Groups that are formed by choice, like nonprofit organizations that don't aim to make money.
Business entities that focus on making sales, earning revenue, and creating profit.
Financial groups and banks.
Programs or educational institutions.

A company can be set up as a legal person. This means the company itself has limited liability. This protects its members if the company faces problems, as long as they followed the rules. When a company closes, it might need to be liquidated. This means selling its assets to pay off debts and avoid future legal duties. Companies can also join together to form new, larger companies. These are often called corporate groups, which include a main parent company and its smaller subsidiary companies.

What is a Company?
- Where Did the Word "Company" Come From?
- How We Use the Word "Company" Today
Companies Around the World
Different Types of Companies
See also

What is a Company?

A company can be thought of as an "artificial person." It's invisible and you can't touch it, but it's created by law. It has its own legal capacity, meaning it can do things like sign contracts. It also has perpetual succession, which means it continues to exist even if its individual members change. Companies usually have a common seal for official documents. Except for some top leaders, companies are not affected if a member dies, becomes unwell, or goes bankrupt.

Where Did the Word "Company" Come From?

The English word "company" comes from an old French word, compagnie. This word was first used around 1150 and meant "society, friendship, or a group of soldiers." It came from a Latin word, companio, which meant "one who eats bread with you." This Latin word was a translation of an old Germanic phrase that literally meant "with bread."

How We Use the Word "Company" Today

By the year 1303, the word "company" was used to describe trade guilds, which were groups of skilled workers. The idea of "company" meaning a "business association" was first written down in 1553. The short form "co." for company has been used since 1769.

Companies Around the World

Companies are set up and run differently in various countries. Here's a look at how some countries handle them.

Companies in Canada

In Canada, companies can be officially formed at either the national or provincial level. This is done under the Canada Business Corporations Act or similar laws in each province.

Companies in China

According to the Company Law of the People's Republic of China, companies in mainland China include limited liability companies and joint-stock limited companies.

Companies in Germany

In Germany, the most common types of companies are the Gesellschaft mit beschränkter Haftung (GmbH) and the Aktiengesellschaft (AG). The GmbH is a private limited liability company. It is widely used for small and medium-sized businesses. The AG is a public limited company. It is used by larger businesses and those whose shares are traded on stock exchanges. German company law follows the Handelsgesetzbuch. Companies must register with the local commercial register. They also have to follow strict rules for sharing information and keeping financial records.

Companies in Japan

Japanese company law recognizes several types of companies. The most common is the Kabushiki Kaisha, which is similar to a joint-stock company. Another popular type is the Gōdō Kaisha, which is like a limited liability company. The Companies Act of 2005 set up the rules for these and other business types in Japan. It controls how they are formed, managed, and operated.

Companies in Russia

In Russia, companies follow the Civil Code and other federal laws. These include the Law on Joint-Stock Companies and the Law on Limited Liability Companies. Common types of companies there are the Open Joint-Stock Company, the Closed Joint-Stock Company, and the Limited Liability Company.

Companies in the United Kingdom

In the English law system, a company is a legal body registered under the Companies Acts or similar laws. Common types include:

Private companies limited by guarantee: These are often used for non-profit groups like clubs or charities.
Community interest company: These companies are set up to benefit the community.
Charitable incorporated organisation: These are charities that have a special legal structure.
Private companies limited by shares: This is the most common type of company for businesses.
Public limited companies: These are usually large companies that can offer their shares to the public, for example, on a stock exchange.

In the United Kingdom, a partnership is not legally a company. However, people sometimes informally call it a "company" or a ""firm"."

Companies in the United States

In the United States, a company is not always a corporation. For example, a company can be a corporation, a partnership, an association, or a joint-stock company. It can also be a trust, a fund, or an organized group of persons. This is true whether they are officially incorporated or not. It also includes any official like a receiver or a liquidating agent.

Different Types of Companies

Companies come in various forms, each with its own rules and purposes.

A company limited by guarantee (CLG): This type is often used for groups that are not trying to make a profit, like clubs or charities. The members promise to pay a certain small amount if the company goes out of business. Otherwise, they don't have financial rights in the company. This type is common in England. A company limited by guarantee might or might not have share capital.
A company limited by shares: This is the most common type of company for businesses. In this type, the responsibility of each owner (shareholder) is limited to the amount of money they invested. Corporations are the most common example of this type of company. This type is common in England and many other English-speaking countries. A company limited by shares can be a publicly traded company or a privately held company.
A company limited by guarantee with a share capital: This is a mix of the two types above. It's usually used when a company is formed for non-commercial reasons, but some of its activities are funded by investors who expect to get money back. This type of company can no longer be formed in the UK, but some older ones still exist.
A limited liability company (LLC): This type of company is allowed in certain states. It offers limited liability, meaning the owners are protected from the company's debts. It can be managed by its members or by managers. There are also limits on how ownership can be transferred. The LLC structure is often called a "hybrid" because it combines features of a corporation and a partnership. Like a corporation, its members have limited liability. Like a partnership, its profits and losses "flow through" directly to the members for tax purposes. Depending on local laws, an LLC might have to close if a member dies or goes bankrupt.
An unlimited company with or without a share capital: This is a less common type of company. In this case, the owners or shareholders are fully responsible for any debts the company has. This means their personal assets are not protected.

Less common types of companies include:

Companies formed by letters patent: Most of these are corporations sole, which are single legal entities, not companies as we usually think of them today.
Royal charter corporations: In Europe during the Middle Ages, before modern company laws, these were the only types of companies. Today, they are quite rare. Only very old companies (like many British banks) or modern groups that act like regulators (such as the Bank of England) still use this form.
Statutory companies: These are also rare today. They are companies that were created by a special law passed in a specific area.

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