BUSINESS STUDIES MASTER

📘 COMPANY – CONCEPT, TYPES, MERITS & LIMITATIONS

Advanced Study Notes for Business Excellence

🔷 DESCRIPTIVE EXPLANATION

🔹 What is a Company?

A company is an artificial person created by law. It has a separate legal identity from its owners. This means the company can own property, enter into contracts, sue and be sued in its own name.

👉 In simple words:
A company is a business organization formed by a group of people to earn profit, but it is treated as a separate legal entity.

📌 Example (India):

• Reliance Industries Ltd. is owned by shareholders, but legally it is a separate entity.
• If Reliance makes a loss, shareholders are not personally liable beyond their investment.

🔹 Key Features of a Company

• Artificial person
• Separate legal entity
• Limited liability
• Perpetual succession (never dies)
• Common seal (official signature)

💡 Memory Trick: “ASLPC” → A Smart Legal Person Company

🔷 TYPES OF COMPANIES

🔸 1. Private Company

A private company is owned by a small group of people and restricts the transfer of shares.

📌 Example (India): Byju’s (Think & Learn Pvt Ltd), Tata Sons Pvt Ltd

Features:

• Minimum 2 members, maximum 200
• Cannot invite public to buy shares
• Shares cannot be freely transferred

🔸 2. Public Company

A public company can invite the general public to buy its shares.

📌 Example (India): State Bank of India (SBI), Infosys Ltd

Features:

• Minimum 7 members, no maximum limit
• Shares freely transferable
• Can raise funds from public

🔸 3. One Person Company (OPC)

A One Person Company is a company formed by only one person. Introduced in India under Companies Act, 2013.

📌 Example: A single entrepreneur starting a consultancy firm as OPC.

👉 It combines benefits of: Sole proprietorship (single owner) and Company (limited liability).

🔷 MERITS OF COMPANY

💡 Memory Trick: “CLAPS”

• C – Capital (easy to raise large capital)
• L – Limited liability
• A – Artificial legal entity
• P – Perpetual existence
• S – Spread of risk

📌 Example: Reliance raised huge capital from the public → not possible in sole proprietorship.

🔷 LIMITATIONS OF COMPANY

💡 Memory Trick: “COLD”

• C – Complex formation
• O – Over regulations
• L – Lack of secrecy
• D – Delay in decisions

📌 Example: Public companies like SBI must follow strict government rules → slows decisions.

🔶 POINT-WISE REVISION NOTES

✅ CONCEPT OF COMPANY

• Artificial person created by law
• Separate legal entity
• Limited liability
• Perpetual succession

✅ PRIVATE COMPANY

Meaning: Company owned by a small group; Restricts share transfer

Merits: Better control, Quick decisions, Maintains secrecy

Limitations: Limited capital, No public participation

✅ PUBLIC COMPANY

Meaning: Company open to public investment

Merits: Huge capital, High credibility, Growth opportunities

Limitations: Complex rules, Slow decision-making, Less secrecy

✅ ONE PERSON COMPANY (OPC)

Meaning: Company formed by one person

Benefits: Limited liability, Full control, Separate legal entity

🔁 DIFFERENCE: PRIVATE vs PUBLIC COMPANY

Basis	Private Company	Public Company
Members	2–200	Min 7, no limit
Share transfer	Restricted	Free
Public invitation	Not allowed	Allowed
Control	High	Less
Example	Byju’s	SBI

🎯 MEMORY SHORTCUT: “2-200 = Private, 7-infinite = Public”

🎮 SMALL EDUCATIONAL GAME (CLASS ACTIVITY)

🧩 Game Name: “Company पहचानो (Identify the Company)”

👨‍🏫 How to Play: Teacher gives clues, and students guess.

• “I can raise money from the public” & “My shares are freely transferable” 👉 Answer: Public Company
• “Only one owner” 👉 Answer: OPC
• “Maximum 200 members” 👉 Answer: Private Company

🎯 Objective: To reinforce understanding of company types through active recall.