Company

Company is an organization that makes or sells goods or services in order to get money. Business enterprises usually take one of three forms: individual proprietorships, partnerships, or limited-liability companies. In the first form, a single person holds the entire operation as his personal property, usually managing it on a day-to-day basis. Most businesses are of this type. The second form, the partnership, may have from two to 50 or more members, as in the case of large law and accounting firms, brokerage houses (companies of brokers), and advertising agencies. This form of business is owned by the partners themselves; they may receive varied shares of the profits depending on their investment or contribution. Whenever a member leaves or a new member is added, the firm must be reconstituted as a new partnership. The third form, the limited-liability company, functions on the basis of limited liability. Limited liability is the legal position under which the loss that an owner (shareholder) of a business firm may incur is limited to the amount of capital invested by him in the business and does not extend to his personal assets. Acceptance of this principle by business enterprises and governments was a vital factor in the development of large-scale industry, because it enabled business firms to mobilize large amounts of capital from a wide variety of investors who were understandably unwilling to risk their entire personal fortunes in their investments.

1) What is meant by the term “company”? 2) What forms do business enterprises usually take? 3) What is meant by the term “individual proprietorship”? 4) What is meant by the term “partnership”? 5) What is the third form of business enterprises? 6) What is meant by the term “limited liability”?

Holding company

Holding company is a company that owns enough voting stock (a controlling number of the shares) in one or more other companies to exercise control over them. A company that exists exclusively for this purpose is called a pure holding company, while one that also engages in a business of its own is called a holding-operating company. A holding company typically owns a majority of stock in a subsidiary (a company that is owned or controlled by another company), but if ownership of the remaining shares is widely diffused, even minority ownership may suffice to give the holding company control. A holding company provides a means of control of several companies with a minimum amount of investment. The use of a holding company is legally simpler and less expensive than other means of gaining control of another company, such as, for example, merger (the act of joining together two or more companies to form a single enterprise). A holding company is able to reap the benefits of a subsidiary's goodwill (the success of a company, and its good relationship with its customers, calculated as part of its value when it is sold) and reputation, yet its liability is limited to the proportion of the subsidiary's stock that it owns. These and other factors make holding companies an effective form of organization on both national and international levels.

1) What is meant by the term “holding company”? 2) What is meant by the term “voting stock”? 3) What company is called a pure holding company? 4) What company is called a holding-operating company? 5) What is meant by the term “subsidiary”? 6) What stock the holding company gives control over its subsidiary? 7) What company provides a means of control of several companies with a minimum amount of investment? 8) What is the simplest way to gain control of another company? 9) What by the term “merger” is meant? 10) What is meant by the term “goodwill”? 11) What is a holding company able to get? 12) What is a holding company’s liability limited to? 13) What is an effective form of organization on both national and international levels?