Business Environment and Entrepreneurship Company and its Characteristics

Company and its Characteristics

Why to incorporate a company?

To create a separate identity of the business from the identity of the owner. A separate identity is created when the owner has the ability and the feeling that the company can be incorporate and will sustain itself in perpetuity with some personal inputs and financial assistance.

Incorporating a separate business gives you various benefits like Tax benefits, Enhancing credibility and Brand positioning, Personal Asset protection, Deductible expenses, Perpetual existence etc.

Meaning of Company

A company is an association of persons formed and organized to carry on a business.

The term “Company” has no technical meaning. It’s a legal person separate from its members. In other words, it is an entity that engages in a business to earn profit which may be a corporation, a partnership, association, or sole proprietorship etc.

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Characteristics or Features of a Company

Incorporated Association: A company must necessarily be incorporated and separated under the Companies Act.

Limited Liability: Liability of the members of the company is limited to the extent of a number of shares subscribed by them. And in the case of a company limited by guarantee, the liability of the members of the company is limited to the extent of the guarantee given by them.

Perpetual Succession: As a legal person, a company has enjoyed its perpetual succession. A company does not die on the death of its members. Even if all the members of the company dies, a company continues to enjoy the rights, privileges, immunities, estates, and possessions of the company.

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Transferability of Shares: The shares of a company are freely transferable in case of public companies whereas it’s not the same in case of private

Separate Property: Since a company has its common seal so a company can own, hold, dispose off the property in its own name. The property is to be used for the company’s business and not for the personal benefits of the members of the company.

Common Seal: Common Seal is the official signature of the company which is affixed on all the important documents of the company to authenticate any document. Any document on which the seal is affixed, that document is considered to be the authoritative document of the company.

Capacity to sue and be sued: A company is a legal person having separate identity and has the capacity to sued or be sued by the persons in its corporate name. It can also be fined and cannot be imprisoned for any criminal offense.

Separate Legal Identity (Doctrine of Corporate Veil): A company is a legal entity separate from is A company can file suit against the members of the company and the members can file suit against the company. The members of the company are not liable for the liabilities of the company. The concept of separate legal identity was recognized in the famous decided case law of Solomon vs. Solomon & Company limited.

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