This article is written by Ms Kamakshi, a 4th year law student of REVA university

A company can be defined as an invisible, intangible, artificial person created by or on the basis of law, with distinct legal personality, indefinite legal succession, and common seal. Death, madness, or bankruptcy of a single member does not affect it. 

Advantages of Registering a Company; 

Corporation: A company is a legal entity. They are artificial human beings created by law, and their existence is separate from directors and shareholders. A corporation established under the Companies Act. The term “corporation” means the legal recognition of a corporation as a person. It can sue for itself and be sued. An incorporated company enjoys its own rights, has its own responsibilities, and undergoes its own legal proceedings. Once a company is founded, it acquires its own personality. It has broader legal capacity because the company can own its property and incur liabilities. In other words, individual shareholders are not liable for the company’s debts to creditors.

eternal inheritance: Eternal inheritance means permanence or permanence, the company is eternal. It means that the legal entity or company continues to exist until it is legally dissolved. Eternal discipleship is an important factor. As previously stated, it is an independent legal entity unaffected by the death or resignation of its members. No matter what changes. Members, members, employees, shareholders, nothing to affect its existence and will continue to exist in accordance with the Companies Act once incorporated.

limited liability; Limited liability is legal liability for a limited amount of debt. Members’ liability with respect to the Company’s debts is limited. That is, it is limited to the par value of the shares purchased. The exception to this is if the member has contractually agreed to unlimited liability and the terms may vary. Such a company is called an unlimited liability company.

Free and easy share transferability: Company shares are limited by the shares purchased. It can be transferred from one shareholder to another. Shares can be transferred to whomever the shareholder chooses. A copy of the signed share transfer form will be provided to the share purchaser along with the share confirmation. Technically, there are no restrictions on the transfer of shares in a public company. Shareholders can therefore transfer their shares to anyone. Securities or other shares of public companies are freely transferable. However, any agreement or arrangement relating to the transfer of securities is contractually enforceable. For limited liability companies, the law allows limited liability companies to impose restrictions on the transfer of shares. We will never ban stocks outright.

own property: A corporation can acquire, own, enjoy and dispose of property in its own name. Shareholders do not own the company and therefore have no right to claim ownership of the company. Shareholders only invest in the company under the company’s articles of incorporation and measure the amount of the debt. Shareholders are not entitled to participate in the interests of the company. However, it is governed by the agreements contained in the Articles of Incorporation. So society’s property is not personal property. 

sued or sued: Individuals can use their names to take legal action. Similarly, as an independent legal entity, a company can take action against others in its own name, including renaming, mergers or splits. 

double relationship: The Company may enter into agreements or agreements with individual members. It is possible for an individual to manage the company’s operations and remain an employee of the company. A person can be a shareholder, creditor, director and employee of a company at the same time. 

borrowing capacity: Companies enjoy the privilege of debt financing. They have the authority to issue and accept public debt. The company is also calling on banks and other financial institutions to provide greater financial support. Stock raising Corporations are the only type of legal entity that can help promoters raise capital from angel investors, private equity firms, and the stock market. A limited liability company is sufficient to raise shares from angel investors and private his equity investors. On the other hand, for listing or allotment of shares to more than 200 shareholders, a limited liability company is required.

Disadvantages of registering

procedures and costs:  Incorporating a company is a very complicated legal process that takes a lot of time and money. These sophisticated procedures were put in place to discourage serious and unenthusiastic people from doing business. Strict management is required even after the establishment of the company. Comply with the statutory provisions of the Companies Act. Declarations and other documents must be registered with the Commercial Register. Certain special events or activities such as accounting, company audits, meetings, borrowings, lending, capital investments and expenditures, dividends, etc. must be conducted and conducted in accordance with the provisions of the Companies Act. Other businesses do not have to follow as many rules and regulations as corporations.

Company disclosure: Despite a comprehensive legal framework aimed at ensuring maximum transparency and disclosure of corporate information, employees and lower-level members of the company do not have access to corporate information and senior management. Limited.

Separation of control and ownership: Members of the minority shareholders of the company do not have effective control over the company’s functions and decisions.

This happens because there are too many people in the company for an individual or even a small group to have a significant impact on the organization’s work.

So what we call a company’s “property” is just a term with no real meaning. You have no active or full control over the Company’s operations. more social responsibility

Many companies have billions of dollars in net worth and thus employ hundreds of thousands of people. They have a tremendous impact on society and these companies often participate in social activities that are part of CSR (Corporate Social Responsibility) campaigns.

The influence of these giant corporations is so great that they must follow certain social norms and contribute to the development of society.

In some cases, the tax burden increases

Corporations have to pay higher taxes compared to other forms of corporations. Incorporated companies do not receive rebates or tax minimums. Also, corporations must pay income tax at a fixed rate on all income, while other corporations are taxed at graduated or flat rates.

Therefore, many companies often start out as partnerships or partnerships. So as it grows, it becomes a public company.

Detailed payment procedure: The Companies Act prescribes detailed and lengthy procedures for declaring the liquidation of a company. This process is much more time consuming and expensive than the same process in other types of businesses.

Effects of company registration: According to Article 9 of the Companies Act 2013, the effects of company registration are: From the date of incorporation, the drafter of the memorandum and all subsequent members of the company are legal entities. A registered company can perform all the functions of a legally incorporated company. The company also has perpetual inheritance rights with the power to acquire, retain and dispose of all forms of property. You can also enter into contracts, sue, and be sued in the names mentioned. In addition, the company will be a separate legal entity from the founder from the date of incorporation. A binding contract is also formed between the Association and its members as set forth in the Memorandum and Articles of Incorporation. A company exists indefinitely until it is dissolved or the registrar deregisters it.