In this, volume, limited liability companies only will be considered. There are also companies of other kinds, such as companies set up by statute, such as The Nigerian mining corporation; also unlimited companies and companies limited by guarantee.
Companies originally came into existence because of the disadvantage suffered by partnerships. In a partnership, the number of its owners could not exceed twenty and their liability, barring limited partners is not limited to the amount invested in the partnership but extends also to the individual partners’ private possessions. This meant that if a business failed, then a partner could lose both his share of the business assets and also part or all of his private possessions. With the need for bigger firms whose capital could not be supplied by only twenty people, and for whose owners unlimited liability was not a risk to be desired the idea of having limited liability companies gave birth to laws being passed in the U.K in the year 19th century allowing the setting-up of limited liability companies.
The capital of a limited liability company is divided into shares. Those can be of any denomination, such as N5 shares or N1 shares although the most common in Nigeria are N1 and 50k shares. For someone to become a member of the company, that is shareholder, he or she must buy one or more shares. He may either pay in full for the shares that he takes up or maybe partly pay for the share(s) and the balance has to be paid later. Note that, even if a company loses all its assets, a member’s private possessions cannot be touched to pay the company’s debts, other than in respect of the amount owing, on partly paid shares.