Introduction
A company is a larger entity than a partnership. Usually, people from a company when their business is not only for personal benefit or for the benefit of a more large area of people. For this purpose, the company is formed.
There are many definitions of a company, however legally in India the definition of a company is- A company that is formed and registered in the Company Act. This definition is as per the Company’s Act.
In common law a company is defined as a legal person capable of surviving beyond the lives of its member. It can also sue and sued.
But the thing which comes in mind of every person while forming a group of individuals for business is- does the incorporation of a company a good idea? What are the benefits of forming a company? Or what are the advantages of incorporation of a company?
This article tries to find out the advantages of incorporation of a company over other entities like partnership etc.
In India basically, the procedure of incorporation of a company is done as per the Companies Act. It is applicable on both public as well as private companies. A company can easily be formed by 2 persons or more with some common goal.
Advantages of Incorporation of the Company
A company is in much sense a larger entity than any other one. However there are certain advantages of incorporation of a company over other formation, this is-
1. Become corporate personality– After proper incorporation of the company, a company becomes an independent corporate body. By this, the members of the company cannot be held liable for the acts of the company. This was also held in the case of Saloman vs. Saloman & Co. Ltd. 1897 AC 22
2. Limited liability- The Company after cooperation get a separate legal entity, it owns its own business, and member cannot be held liable for its debts. Hence liability is also limited to shares. This means that the liability will be in the ratio of the number of shares partners have in the company.
3. Perpetual Liability– The incorporated company never dies. It is forever. The membership of a company changes from time to time however the company remains the same. The end of a company can only be possible as per the law. And that law is the Companies Act 2013.
4. Common Seal– the Company has no physical existence. It is represented by its partners and agents. The work of the Company is done by its agents with the help of the company’s seal. All those work done by the agents with the seal of the company comes under the work of the company. The company will have only one single seal.
5. Transferable share– The Company is divided between partners in shares. The shares can be moved and are capable of transfer. The procedure for this is provided under section 82. The transferable share will in turn transfer the membership of the company.
6. Separate Property– The property is vested within the company body. It is capable of holding and holding company in its name. This property is independent of its partners.
7. Can sue & can be sued– The Company once formed becomes a legal personality and hence it can sue and can be sued just like a normal person. But when it comes to imprisonment, it can only be fined and compensate but cannot be punished with imprisonment. As it does not have any physical existence.
8. Attract Professional manager– a company is capable of attracting a professional managers.
9. Easier access to capital– The incorporation of a company held the partners to raise capital. Also with the help of this business grow easily. It also helps the company to get loans easily.
Conclusion
The incorporation of the company has many other advantages too. It is governed under the companies act. It is a larger entity than a partnership.
The advantages are not just limited to its incorporation. It also helps it to grow faster as compared to a partnership or any other corporation or entity. The banks and any other organization have more faith in a company than any other corporation.
Hence it is said that if one wants to go to a joint business, then he/she must go to company business. As we can see that most of the billionaires in India and the world are of companies and are not of partnership or any other formation. Hence a company prevails over other formations.
This Article is Written by Srishti Rajpoot, 2nd Year BA.LLB Student of Gautam Buddha University, Greater Noida.
