classification companies on the basis of liability

Definition: A company where the liability of each member is limited to the amount, if any, unpaid on the shares respectively held by them.
This means that if a shareholder has fully paid for their shares, they have no further liability to the company's debts.
If the shares are not fully paid, the shareholder is only liable to pay the outstanding amount on those shares.
Purpose: These are the most common type of company, typically formed for commercial purposes with the objective of generating profit for its shareholders.
Capital Structure: Funds are raised through the issuance of shares to the public or private investors.
Examples: Most public and private limited companies (e.g., Apple Inc., Microsoft Corp.).

Definition: A company where the liability of each member is limited to such amount as the member undertakes to contribute to the assets of the company in the event of its being wound up.
Unlike shares, members do not hold shares and therefore do not contribute capital through share subscriptions.
Instead, members provide a guarantee (a promised amount) that they will pay if the company goes into liquidation.
Purpose: These companies are typically established for non-profit purposes, such as charities, clubs, educational institutions, professional bodies, or research organizations.
They usually reinvest any surplus income to further their objectives rather than distributing profits to members.
Capital Structure: Funding often comes from grants, donations, membership fees, or other income-generating activities related to their purpose.
Examples: Many charitable organizations, trade associations, and some professional bodies.

Definition: A company where the liability of each member is unlimited. This means that if the company incurs debts that it cannot pay, the personal assets of the members can be used to settle those debts.
There is no upper limit to the financial exposure of the members for the company's obligations.
Purpose: These companies are often chosen by smaller, private businesses or professional firms (e.g., solicitors, accountants) where the owners prefer to have full control and are willing to accept the higher risk of unlimited liability.
They may also be formed when a limited company is not required, or for specific investment vehicles.
Capital Structure: Capital is typically raised directly from the members and there are no shares in the same sense as a limited company, though capital contributions are made.
Examples: Some private companies, partnerships that opt for corporate status without limited liability.