Characteristics of Company

Characteristics of Company

In this article some important characteristics of the company have been explained. Company is a form of business in which shareholders have limited liability and this limited liability is the most important characteristic of a company.

 Important characteristics of Company

Some important Characteristics of Company includes limited personal liability of shareholders, sharing of profits among shareholders, wider access to Finances, fairly large scale of operations and ability to execute huge Projects etc. These Characteristics of a company have been briefly explained below

1.   Limited Liability:

First important characteristic of Company is its limited liability towards the shareholders or equity holders of the company. Equity holder liability is limited to the extent of their invested amount (subscribed capital) in the company, and equity holders are not personally liable for those liabilities which could not settled form the disposal proceeds of the assets of the company.

2.    Profit Sharing:

Second characteristic of Company is its sharing of profits among the shareholders or equity holder of the company. Profits of the company are shared among the equity holders in proportionate to their investments. This characteristic is lacking in the sole proprietorship.

3.    Sources of Financing:

Third important characteristic of Company is its wide access to the financial instruments. Financial institutions are more interested to grant loans to the companies, because corporate business are extensively regulated and run by a professional team. Thus corporate business has low risk profile than non corporate business and financial institutions prefer corporate businesses for offering different credit facilities.

4.   Separate Legal Entity

Another important of characteristics of company is its separate legal entity. Thus a company may sue or may be sued by other party. The company acts as artificial person for managing all of its affairs.

5.   Large Scale operations

Another important characteristic of Company is its ability to execute huge projects. Company has resources and capacity to execute mega projects, while sole proprietorship and partnership does not have such resources and capacity to execute mega projects.

6.    Perpetual Succession

Other key characteristic of Company businesses is long or continue life. Company continue to exit even a shareholder dies or becomes insolvent.  This characteristic is called perpetual succession. This characteristic is lacking in case of partnership.

7.   Formal Process:

Setting up a Company is a less formal process. There are a lot legal requirements to be fulfilled by the promoters for setting of a company. The starting a sole proprietorship and partnership is relatively easier and less formal than a company.

8.   Open Transfer of Ownership:

Another important characteristic of company is its open transfer of the ownership. There is no restriction over the transfer of ownership and Ownership of company can be transferred to another person without consent of other shareholders. This characteristic is lacking in case of partnership, where consent is required.

9.   Memorandum & Articles of Association:

There are two important document of a company i.e. memorandum of association and articles of association. Memorandum of association is a creating document of the Company, while articles of association contain the rules for the company.

List of important Characteristics of Companies

Some important characteristics of a company are listed below

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.