What do you mean by company? Explain the nature and characteristics of company?
Answers
A company is a third legal business structure and has entirely a different organizational structure from the sole proprietorship or partnership. Its formation is due to firstly, the sole proprietorship and partnership cannot meet the increased capital demand of industry and commerce. Secondly, the company ensures the protection of limited liability to the shareholders and investors.
According to Prof. L.H. Haney, “Company is an artificial person created by law having separated entity with a perpetual succession and common seal”. According to Justice Lindley a company means association of persons who contribute in shape of money or money’s worth to a common stock and employ it for some specific purpose.
Meaning of the Company— The term ‘Company’ has been derived from the combination of two words, namely,’ com’ and `panis’. The word `corn’ means ‘together’ and ‘panis’ means ‘bread’. Thus, initially the word ‘company’ referred to an association of persons who took their meal together. The merchants in the leisurely past, took, advantage of these festive gatherings to discuss their business matters. Initially the word “company” did not have strictly and technical or legal meaning.
Nature and Advantages of a Company—
1. Limited Liability—
Limitation of liability is another major advantage of incorporation. The company, being a separate entity, leading its own business life, the members are not liable for its debts. If the liability of members, as is usual, is limited by shares, each member is bound to pay the nominal value of the shares held by him and his liability ends there.
2. A Company is a Legal Person—
Since a company is a person in the eye of law hence it can sue and be sued in its corporate name.
3. Company is Entitled to Collect Money from Public-
A company gets the privileges of collecting interest free money from the public for its business by making a public issue or through private placement of shares and other securities.
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