Setting Up a Company

hy do companies exist?

During the Middle Ages, kings and their enterprising subjects collided. Kings started granting licenses to people to discover countries, pursue trade, and so on. This was a clever ruse to make sure the king got a cut without having to put up any real money. The money was normally raised by enticing several wealthy subjects to invest in the enterprise (remind you of modern investment methods?). These missions were highly speculative (just think of the number of trips to "discover" America before Columbus succeeded).

To protect themselves and the king from subsequent loss they devised the concept of the corporation (from the Latin corpus for body) or company.

The company is a legal body in its own right, just like you or I. It can be sued, taxed, rewarded, and is made liable to the law in just the same way as an individual. We take companies for granted nowadays, but whoever encapsulated the idea originally was a genius. Then came a slight but enormously important refinement: The limited company.

Limited companies limited the liability of the investors, so they were prepared to take risk. Legally, they could lose what they invested but no more.

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