Characteristics of Company

Characteristics of Company

Company is a form of business, which is owned by many shareholders and run by Board of Directors. Some important Characteristics of Company includes limited personal liability, sharing of profit among shareholders, wide access to Finances, fairly large scale operation & Projects etc.  Characteristics of company have been briefly explained below

1.   Personally unlimited Liability

First characteristic of Company is limited liability of the shareholders of the company. It means that, in case liquidation, only assets of business are utilized to pay off the liabilities. Shareholders of the company are not personally responsible for paying the business liabilities.

2.    Profit Sharing

Second characteristic of Company is sharing of its profit among the shareholders of the company. This profit is technically known as dividend. Dividend is announced on the bases of paid up capital. Dividend has been discussed in detail in my other article.

3.   Wide access to Finance

Third important characteristic of Company is its wide access to the financial facilities. Financial institutions are more willing to approve the loan to the companies than partnership firm or sole proprietorship.

4.   Separate Legal entity

Company has a separate legal entity. It means that company can enter into contract with its name; similarly company can sue and can be sued. This is an important characteristic of company.

5.   Big Projects

Another important characteristic of Company is its fairly large scale of operation or ability to carry out the huge projects. Company can undertake huge projects due to availability of huge finances to the companies.

6.    Perpetual Succession

Other key characteristic of Company businesses is its unlimited life, this characteristics is technically known as perpetual succession (continue to exist on the death of shareholder). This characteristic lacks in case of partnership.

7.   Formalities

Setting up a Company requires a lot of legal formalities as compared to sole proprietorship and partnership.

8.   Transfer of Ownership

Easy transfer of ownership is an important characteristic of company. Ownership of company can be transferred to another person without consent of other shareholder. In case of partnership such permission is required from the other partners for transfer of ownership.

9.   Memorandum & Articles of Association

Company is created with the help of memorandum of association. Memorandum of association serves as constitution of the company, where Rules under which the company operates are known as articles of association.

List of important Characteristics of Companies

1.    Shareholder liability is limited to the amount of invested capital.

2.    Profits are shared among the shareholders of the company.

3.    Companies have more access to finances.

4.    Transfer of ownership does not require any permission of shareholders.

5.    Company continues to exist in case of death of a shareholder.

6.    Company is an artificial person and has separate legal entity.