What exactly is a company?
Without the foundations of your knowledge solid, you can make costly mistakes as you leap into the terrifyingly rewarding world of business ownership. Sometimes it’s good to ask the simple questions before digging into the more complex ones.
There are so many terms out there to describe and identify business operations. Words like enterprise, corporation, business, LLC are sometimes flung about interchangeably and in fact, they all mean something quite different when you get down to it.
A company is generally formed for profit. It is a separate entity from those who own it, making it different from other business structures. Owners hold shares in the company. There can be a single shareholder or hundreds of them.
There are three different types of companies in New Zealand and you need to choose what the best structure is for the success of your brand.
Limited Liability Company
A Limited Liability Company, or LLC, is the most common type of company structure. You can identify these by the word ‘Limited’ or ‘Ltd’ placed at the end of their trading name.
The term ‘limited liability’ is in reference to the shareholders, who are not responsible for all of the legal and financial obligations of the company. The company itself is liable for these.
A co-op is also an LLC, but a specific kind. The purpose of a co-operative company is to provide commercial services to its shareholders. There must be at least a 60% majority control of members with voting rights.
Such companies can operate in any sector, including financial, education, health, utilities, retail, agriculture or horticulture. Co-ops are registered in the same was as a limited liability company and then additionally registered under the Co-operative Companies Act 1996, allowing them to use the term ‘co-operative’ in their name.
An unlimited company has no limitations on the shareholder’s liability for its debts. In other words, should a company go into debt, the shareholders must pay it. These are relatively rare understandably, as not very many people are willing to unnecessarily put their personal assets at risk for no reward or reason.
Often they are necessary to meet some very specific legal requirements, usually international ones.
Information provided on this website is of a general nature only and not legal advice. Please visit our disclaimer for further information.