Company

A company is a business organization formed by two or more persons—or in some cases a single person—to conduct commercial, industrial, or service activities. A company possesses assets, finances, and management structures, and typically exists to generate profit, though non-profit companies also exist.

Under most legal systems, a registered company can possess a legal personality distinct from its members, meaning it can own property, enter contracts, sue, and be sued in its own name—unlike individuals. This distinction forms the basis for separating company assets from shareholder assets.

Essential characteristics

Every company typically has capital (money or property contributed), a business plan, a business name, and a management structure. It operates under bylaws or articles of association that define shareholder rights, the powers of management, and the distribution of profits.

Types

Common classifications include partnerships, in which members bear personal liability; limited liability companies, in which members' losses are confined to their investment; and public companies, whose shares are traded on the market. State-owned and hybrid companies also exist.

Limited liability

Limited liability means company debts are paid from company assets only. This arrangement reduces investor risk and encourages capital mobilization. Some legal systems permit piercing the corporate veil if fraud or misconduct can be demonstrated.

Management and oversight

Larger companies distribute authority among a general shareholder assembly, a board of directors, and executive management. The separation of ownership and management creates what is known as the agency problem: managers may pursue their own interests. This is addressed through audited accounts, reporting requirements, and securities regulation.