Why to form a company ?

 

Why to form a company ?

There are different forms of organisations to choose from to do business such as sole proprietorship, partnership, co-operative societies, and joint stock company. Each one of these organisations has special features and characteristics of its own. The company as a form business organization that has come to acquire a pre- eminent position in modern times.Its superiority over other forms of business organisation is due to the following special characteristics :

Distinct legal entity :

On registration a company acquires a distinct legal entity of its own capable of assets, incurring liabilities and debts, charging and being claimed. A partnership firm on the other hand has no independent existence apart from its partners in the legal entity.

Limited Liability of a company member:

A company members liability is limited to the duration they have contributed or have undertaken to contribute to the capital of the company.The creditors of the company have no rights against the company members as they cannot look beyond.The benefits of the company for gratification of their claims for registrations.

Perceptual existence :

Once the company is registered that has perceptual existence. It never dies notwithstanding any change in its members. The death or insolvency of a member does not change the corporate entity. Which continues to remain in existence eternally till it is wound up in conformity with the provisions of the law under which it is incorporated of a company.

Common seal :

Once the company is registered that also has a common seal. In the case of corporate bodies they are not living persons who can sign. The common seal is a physical impression made upon written documents executed by a company for his seal.

Transferability of shares :

The shares and other interests of members in a company are portable properties. The shares are transferable in the manner provided by the objects of the registration company.

Option to contribute :

The members have the choice to contribute to the capital of the company according to their capacity. They can receive their share of profit earned by the company. In proportion the company to the share capital contributed by them.

The company has a huge capital base:

A company has a large capital base to meet their requirement of funds for business. The company is issuing their shares to any number of persons except in the type of a private limited company. The private company members cannot exceed fifty.

Subject to the discipline of law :

The company is subject to the discipline of regulatory allocations of the companies act 1956 of the directives and its objects. The area of its business activities is clearly defined by the objects clause of its directive of association which is its charter. The objects are the bye laws regulating the internal administration of the company. The objectives laid down in the directive of the company for achieving.

Preferential treatment :

The company to form of business organisation is accorded preferential treatment by the creditors. The banks and financial institutions for grant of loans and by the state industrial development corporations for grant of incentives for promotion and development of Industry.Where the registration in Chennai has an companies act that a business is to be incorporated.

Restrictions on purchasing of its own shares

The company is restrained from purchasing its own shares except in certain cases.