BUSINESS STUDIES UNIT-2 CBSE|PART 6|FORMS OF BUSINESS ORGANISATION|Joint...

A company is an association of persons

formed for carrying out business

activities and has a legal status

independent of its members. The

company form of organisation is

governed by The Companies Act, 1956.

A company can be described as an

artificial person having a separate legal

entity, perpetual succession and a

common seal.

The shareholders are the owners of

the company while the Board of

Directors is the chief managing body

elected by the shareholders. Usually,

the owners exercise an indirect control

over the business. The capital of the

company is divided into smaller parts

called ‘shares’ which can be transferred

freely from one shareholder to another

person (except in a private company).

Features

The definition of a joint stock company

highlights the following features of a

company.

(i) Artificial person: A company is a

creation of law and exists independent

of its members. Like natural persons,

a company can own property, incur

debts, borrow money, enter into

contracts, sue and be sued but unlike

them it cannot breathe, eat, run, talk

and so on. It is, therefore, called an

artificial person.

(ii) Separate legal entity: From the

day of its incorporation, a company

acquires an identity, distinct from its

members. Its assets and liabilities are

separate from those of its owners. The

law does not recognise the business

and owners to be one and the same.

(iii) Formation: The formation of a

company is a time consuming,

expensive and complicated process. It