Essential features of company

A company is a organisation with a separate identity and restricted liability that was founded for the purpose of conducting business. It is a juristic person with a separate legal entity from the persons who make it up, capable of its own rights and obligations, and endowed with the ability to continue in perpetuity. According to the Companies Act of 2013, a ‘company’ is one that is founded and registered under the Act or one that is already in existence, i.e. one that was formed or registered under any of the prior company laws. Sole proprietorship and public limited company are examples of business forms.

Essential Features of a Company

Registration

A company can only exist after it has been registered under The Companies Act. A Statutory Corporation, on the other hand, is constituted and begins activities as specified in the Act as passed by the Legislature. Registration is not required in the event of a partnership.

Voluntary Association

A company is a voluntary association of several people. As a result, a corporation is founded by the members’ choices and permission.

Legal Personality

By law, a corporation is treated as if it were a single person i.e., known as a Separate Legal Entity. It has a legal existence. Even in the case of a “One Person Company,” this law applies.

Contractual Capacity

In his individual role, a shareholder of a company cannot bind the company in any way. A corporation’s shareholders or employees might enter into contracts on behalf of the company and then affixed by the seal of the company and has to be in accordance with MOA and AOA and other Laws & Regulations.

Management

The Board of Directors, full-time Directors, Managing Directors, or Managers oversee a corporation. These individuals are chosen in accordance with the act and also the company’s Articles of Association. As such, a shareholder is unable to participate in the management and functioning of a company.

Limitation of Liability

The liabilities of a company’s shareholders are usually restricted. Individual shareholders are not creditors of a company, and just a decision acquired against a company cannot be enforced against any shareholders. It can be used to seize the company’s assets.

Duration

A firm that is created through a manner other than natural birth has the property of immortality. Its existence is not determined by the lives of its constituents. It can continue to exist even if all of its members die or are declared bankrupt. Its ability to continue indefinitely ensures its survival.

Members may come and go, but the business continues unabated until it is dissolved by a legal process. Also, a shareholder who cannot receive his money back from the company is a cause of its demise. In every way, the corporation is preferable to a partnership or perhaps a sole proprietorship.

Taxation

In many cases, the tax burden on corporations is greater than that on partnerships. For example, a corporation’s profits are taxed at a flat rate, whereas unincorporated organisations, such as partnerships, are taxed at slab rates. That indicates that the income-tax rate doesn’t really grow or fall in response to the level of earnings; it remains constant irrespective of whether profits are high or low. The rate for a sole proprietor or partnership firm is generally progressive, increasing as the number of assessable income increases.

Control

The members of the corporation who contribute the share capital possess ultimate control over the firm’s actions, according to law and theory. Every corporation is obligated to convene an annual general meeting at which shareholders can exercise their power of control. In practice, the Board of Directors or the ‘inner group’ has control over the management of the firm. However, the Board is required to post and present the accounts including results of the company’s operations to the shareholders at the annual general meeting.

Financing

A private limited company is founded when financial requirements are modest and it is desirable to maintain the business’s secrecy and family nature while benefiting from limited liability. A private firm obtains financing through private agreements with friends and family. It is unable to sell its stock to the general public. When a large amount of capital is needed for production and distribution, a public limited company is founded and the general public is encouraged to contribute.

A prospectus must be issued for this purpose, encouraging the general public to purchase the company’s shares. This is a complicated document that must provide a lot of information and costs a lot of money to prepare and distribute. However, it enables the company to raise capital from a wide range of sources and in amounts that significantly exceed the capabilities of partnerships.

Conclusion

The process of forming a public or private business is lengthy and involves a great deal of paperwork. However, the organisation assists you in raising funds, something you may not be able to do without it. Before starting a business, it’s a good idea to learn about the many sorts of businesses and which one would be ideal for you. A company can be a commercial or industrial enterprise. Because different kinds of companies are taxed differently, the company’s taxation determines its category. Hope you understand now all about the essential features of the company.