Features of a Company

Once a business is incorporated as a company, it acquires a distinct bundle of legal characteristics that sets it apart from a sole proprietorship or a partnership firm.

1. Artificial person created by law. A company has no physical body of its own, yet the law treats it as a "person" capable of owning property, earning income, entering into contracts, and being taxed in its own name. Being artificial, it can act only through natural persons — its directors and officers — who function as its hands and mind.

2. Separate legal entity. The company's identity, property, and debts are entirely distinct from those of the persons who own it (its members/shareholders). A shareholder's personal wealth is not the company's wealth, and the company's debts are not the shareholder's personal debts. A member can, in the ordinary course, even become an employee of, or a creditor to, the very company in which they hold shares — something legally meaningless in a sole proprietorship, where owner and business are the same person in law.

3. Perpetual succession. A company's existence is independent of the lives of its members. Members may die, resign, transfer their shares, or become insolvent, but the company's own legal existence continues unaffected — "members may come and members may go, but the company goes on forever" until it is formally wound up under the Act.

4. Limited liability. In a company limited by shares — the most common type — a member's liability for the company's debts is limited to the amount, if any, remaining unpaid on the shares they hold. Once a member has paid the full value of their shares, no further personal contribution can be demanded, however large the company's losses turn out to be.

5. Transferability of shares. A company's capital is divided into small units called shares. In a public company, shares are, in general, freely transferable, giving shareholders liquidity that a partner's stake in a firm does not offer. A private company's articles, by contrast, place restrictions on transferring its shares.

6. Capacity to sue and be sued. Being a separate legal person, a company can enforce its own legal rights by suing in its own name, and can equally be sued in its own name — the company itself, not its individual directors or shareholders, is the party before the court (subject to specific statutory provisions that may fix personal liability on an officer for a particular default). …