A COMPANY: Meaning, Types & Securities

image source: tech ambassador

An association of people formed for a common goal is what the word “company” means in a literary context. A company is a legally recognized voluntary group of individuals that has a distinctive name, and a common seal, is established for the purpose of conducting business for profit, has limited liability, is a corporate body, and has perpetual succession. However, to have more understanding of what a company is all about, which includes its securities, types, and generating of a name, this post is for you.

A Company 

Corporations, partnerships, associations, joint-stock companies, trusts, funds, or organized groups of persons, whether or not incorporated, as well as any receiver, or similar official, or trustee in bankruptcy, liquidating agent, for any of the foregoing, are all examples of companies.

A more accurate, modern, and all-encompassing definition of a firm might be: “A company is thus created by a legal person or group of legal persons to do business or carry out an industrial venture that acts as an artificial legal person.”

Qualities & Characteristics of a Company

Incorporated association: Upon registration with the Companies Act, a company is said to have been formed (or another equivalent act under the law). For a corporation to be recognized as a legal association, it must meet certain requirements in terms of its shareholders, directors, share capital, and legal documents (MOA, AOA).

  • Artificial Legal Person: A firm is considered to be an artificial legal person under the law if it has the authority to buy, sell, or otherwise dispose of any property, to enter into agreements in its own name, and to bring legal actions against and be sued by third parties.
  • Separate Legal Entity:  A separate legal entity ensures that only the business is accountable for paying off debts and facing legal action for its actions. Individual members cannot be held accountable for the company’s conduct. The corporation is also not responsible for paying the members’ personal debts.
  • Permanent Existence: A company is a reliable business organization, in contrast to other unregistered business entities. Its existence is independent of that of its directors, employees, or stockholders. Members may join and go, yet the business remains active forever.
  • Common Seal: Because a business is an artificial legal person, it substitutes its common seal—which has the company name engraved on it—for its signature. Every document with the business’s common seal on it will have legal force for the company.
  • Limited Liability: A company’s liability may be restricted by a guarantee or restricted by shares. The responsibility of the shareholders in a business limited by shares is capped at the unpaid value of their shares. With a corporation limited by guarantee, the members’ liability is capped by the amount they had committed to contribute to the company’s assets in the case of its dissolution.

Types of Company 

A company varies in different types, and we will be looking into them in a short while. Let us continue reading.

#1. Private Company Limited by Shares (Limited or Ltd)

The typical trade corporation is by far one of the most common types of a company. It must have at least one shareholder and at least one director, and it grants its members full limited liability. Make sure you have all the necessary information before registering online.

#2. Public Limited Company (PLC)

For businesses looking to sell shares to the general public. At least two shareholders, two directors, and a company secretary are required for a PLC. At least 25% of its original share capital, which must be at least £50,000, must be paid up at incorporation. A PLC must submit a return to Companies House confirming that it has raised its minimum share capital and obtained its trading certificate from the organization before it can engage in any business. Make sure you have all the necessary information before registering online.

#3. Limited Liability Partnership (LLP)

Widely employed by professional and small business organizations. a combination of a business and a partnership. Make sure you have all the necessary information before registering online. LLP is also one of the most common types of a company.

#4. Property Management Company

The documents, which describe the property address and have certain restrictions, are frequently drawn up where a property is divided into units, such as flats in a building, to manage the common areas and frequently the freehold of the property. A business of this type may be restricted by shares or restricted by guarantee. Make sure you have all the necessary information before registering online.

#5. Right to Manage Company (RTM)

A unique corporation where leaseholders are able to exercise their rights under the 2002 Commonhold and Leasehold Reform Act. Make sure you have all the necessary information before registering online, as it regards this is one of the most common types of a company.

#6. A Charitable Company Limited by Guarantee

Charity organizations need carefully drafted articles, and Community Companies offer this sort of organization a specialized service.

#7. Community Interest Company (CIC)

A Community Interest Company cannot be registered electronically, hence expert drafting is necessary. Community Businesses offer this kind of business a professional service.

#8. Community Amateur Sports Club (CASC)

A business whose bylaws satisfy HM Revenue and Customs’ criteria for CASC recognition. Community Businesses offer this kind of business a specialized service.

Read Also: Property Valuation: How to Value Your Real Estate Investment & Properties.

Generating a Company Name 

Your startup’s success might be significantly impacted by choosing the right name. The wrong name can cause financial and legal problems that can’t be solved and make it hard to connect with customers. In contrast, a strong, memorable name can be quite beneficial to your marketing and branding initiatives of generating a name for your company.

The following list of tips can help you come up with a catchy name when generating a name for your company:

#1. Avoid Hard-to-Spell Names

You don’t want potential clients to have trouble finding your company online. (I never understood why the photo-sharing website was dubbed “Flickr.” You don’t want to have to keep correcting the spelling of your name. Ensure simplicity.

#2. Avoid Choosing a Name That Can Limit Your Company as it Expands.

Using a name that is too specific could lead to future issues. Imagine if Jeff Bezos had chosen “OnlineBooks” as the company’s name rather of “Amazon.” Therefore stay away from companies with names like “LugNuts Unlimited” or “Wedding Dresses of San Francisco.” You shouldn’t restrict your business to a certain product or location.

Do a web search for the name once you’ve chosen one you like. You’ll likely discover that someone else is already utilizing that company name. That won’t completely steal the show, but it ought to make you think twice.

#4. Register A .com Domain.

It is strongly recommended that you choose a “.com” domain name for your company instead of a domain extension like.net ,.org,.biz, or another alternative. Consumers frequently connect a domain ending in “.com” with an older company. Your preferred.com name will undoubtedly already be registered to someone, however, many domain holders are open to selling their name for the proper sum.

Consider purchasing the desired.com domain as an investment in your company. On websites like GoDaddy.com or NetworkSolutions.com, you may check whether a domain name is available. If it is, you can frequently find the owner of the domain name and ask them if they are prepared to sell it by utilizing the “Whois” function. Be sure to claim your preferred company name on well-known social media platforms like Facebook, Twitter, and Pinterest.

#5. Choose a Name with Some Meaning.

The ideal business name should suggest something significant and uplifting about your enterprise. Can consumers quickly understand what your company does? While meaningless names like “Google,” “Yahoo,” or “Zappos” have some appeal because they are memorable, you will spend a lot more money on branding if you use these names. Canny.com, Cling.com, Afire.com, and Administer.com are a few instances of memorable domain names that are straightforward, clear, and engaging. It is brilliant to choose a domain name like “OnlineTickets.com” because it accurately describes the company’s operation and is advantageous for SEO.

#6. Search Trademark Databases.

To learn if you may register a trademark or service mark for the name, conduct a search at USPTO.gov.

#7. Search the Secretary of State Database.

You should check the Secretary of State’s records to be sure your name won’t be confusingly similar to a business name that has already been registered since you’ll probably want to organize your company as a corporation or LLC. The Secretary of State may refuse to let you register it if it is too similar to an already-registered name. You can carry out this kind of search with the aid of your company attorney. 

#8. Judge Whether the Name is Memorable.

Naturally, you don’t want your company to have a boring name, but you also don’t want it to be overly imaginative. Without hesitation, your employees should be able to identify their place of employment, and you want your brand to be recognized by your intended market.

#9. Request Opinions on the Name.

After coming up with five or ten names, have them reviewed by close friends, family members, and dependable coworkers. Ask your intended audience for input as well. Moreover, make sure the name doesn’t have any unfavorable connotations (as when GM dubbed its new automobile model the “Nova” despite not recognizing that the word translated to “doesn’t go” in Spanish).

#10. Check to See if the Name Sounds Nice and is Spoken Out Loud.

Sometimes names look good on paper but sound terrible when spoken. Also, if it’s spoken out loud, watch out that it’s not spelled incorrectly.

#11. Ensure that you Personally Like the Name.

Since you, as the business owner, will have to live with the name for a very long time, make sure you like it and are confident that your consumers will like it as well. Give it some thought and start out right.

Read Also: How to Value a Company: Examples, Formula, Process & Guide

Securities of a Company

A company’s financial instrument or asset that can be exchanged on the open market is referred to as a “security.” Examples include stocks, bonds, options contracts, mutual fund shares, etc. The examples are given all fall under one kind or category of security. Debt, equity, derivative, and hybrid securities are the four different categories of security.

#1. Debt Securities of a Company

Debt securities, also known as fixed-income securities, are a representation of borrowed money that needs to be repaid, with terms defining the sum borrowed, the interest rate, and the maturity date. In other words, debt securities of a company are financial instruments that can be traded between parties, such as bonds (such as government or municipal bonds) or certificates of deposit (CDs).

Debt instruments, such as bonds and certificates of deposit, typically require the holder to pay periodical interest payments, the principal amount owed, as well as any other contractual obligations that may be specified. These securities are typically sold for a set period of time before being redeemed by the issuer.

#2. Equity Securities of a Company

Shareholders’ ownership interest in a corporation is represented by equity securities. To put it another way, becoming a shareholder of an organization requires making an investment in its equity capital. Holders of equity securities are not eligible for a regular wage, but they can make capital gains by selling their stocks, which is how they vary from holders of debt securities. Another distinction is that equity securities give the holder ownership rights, making him a shareholder with a stake corresponding to the number of bought shares.

If a company files for bankruptcy, the equity holders can only split the interest that is left over after all obligations have been met by the holders of debt security. Businesses regularly pay dividends to shareholders who share in the earned profits from their main company operations, but debt holders do not get dividend payments.

#3. Derivative Securities of a Company

Financial instruments issued by a company are known as “derivative securities,” and their value is determined by fundamental factors. Assets like stocks, bonds, currencies, interest rates, market indexes, and goods are examples of variables. Using derivatives is primarily done to weigh and reduce risks. It is done by getting access to assets or markets that are hard to get to, by making it easy to speculate, and by protecting against price changes.

In the past, derivatives were employed to guarantee stable currency rates for items that were transacted abroad. Foreign traders required an accounting system to fix the exchange rates of their various national currencies.

#4. Hybrid Securities of a Company

As the name implies, hybrid security is a kind of security that combines features of both debt and equity securities. Hybrid securities are frequently used by banks and other organizations to raise capital from investors.

Similar to bonds, they often make a greater interest payment promise at a set or variable rate until a specific future date. The frequency and timing of interest payments are not guaranteed, unlike with bonds. Even better, an investment may be canceled at any time or converted into shares.

Preferred stocks, which enable the holder to receive dividends before the holders of common stock, convertible bonds, which, depending on the conditions of the contract, can be converted into a known quantity of equity stocks during the life of the bond or at maturity, are examples of hybrid securities.

Hybrid securities of a company are intricately crafted goods. Even seasoned investors may find it challenging to comprehend and assess the risks associated with trading them. When purchasing hybrid securities, institutional investors can have trouble comprehending the terms of the agreement they enter into.

What is a Company in Business? 

A corporate structure that is distinct from its owners legally is a company. Due to additional reporting requirements and higher-level legal obligations, the business structure is more complex and has greater setup and administrative costs.

What is an Example of a Company? 

Firm and the word “business” are interchangeable nouns. The most prosperous American businesses include those run by Amazon, Apple, McDonald’s, Microsoft, and Walmart.

Why is it Called a Company? 

Due to the desire of its employees to create value, a business is referred to as a company. Latin is the origin of the word “produce,” which means to lead forth or bring forth. Ancient French, which means companies or companionship, is where the word “company” first appeared.

What are the Elements of a Company? 

Important components of a successful business?

  • Core values
  • Company Mission
  • Work environment.

What are the Essentials of the Company?

According to the Companies Act of 2013, an Indian company is defined as a registered association that is an artificial legal person with limited liability, a common seal for its signatures, and a common capital made up of transferable shares.


Leave a Reply

Your email address will not be published. Required fields are marked *

You May Also Like