# Companies Based on Liability
Under the Companies Act, 2013, companies are classified into three categories based on the extent of their members' liability:
## 1. Company Limited by Shares
- The liability of members is limited to the unpaid value of shares held by them.
- Once shares are fully paid up, members have no further liability.
- Important: The benefit of limited liability is for the shareholders only — the company itself has unlimited liability for its debts.
## 2. Company Limited by Guarantee
- The liability of members is limited by the Memorandum of Association (MOA) to a fixed amount.
- This amount represents what each member agrees to contribute to the company's assets in the event of winding up.
- The guarantee is payable only on winding up, not during the company's normal operation.
## 3. Unlimited Company
- A company where there is NO limit on the liability of its members.
- Members are liable for the full debts of the company like partners in a partnership.
- These are usually private limited companies with unlimited liability.
## Comparison Snapshot
| Type | Extent of Members' Liability | When Payable |
|---|---|---|
| Limited by Shares | Up to unpaid amount on shares | When called by the company |
| Limited by Guarantee | Up to guarantee amount stated in MOA | Only on winding up |
| Unlimited Company | No upper limit | As required to meet company debts |