Advantages and Disadvantages of incorporation of It Company

A company incorporated under the Conlpanies Act has many advantages and merits in comparison to carry on a business in the fonn of a partnership
firm. The advant.ages of incorporating a company are:
1. The company on incorporation obtains independent corporate eXistence. It is vested withjan independent legal personality distinct from its members. It
becomes a body corporate capable of immediately functioning as an incorporated individual.
2. Limited Liltbility. Limited liability is another major merit of incorporation. The company, being a separate entity, leading its own business life, the
members are not liable for its debts. The liability of members, as is usual, is limited by shares, each member is bound to pay' the nominal value of shares
held by him and uothing more. In enables even the less enterprising people to take part in industrial ventures.
3. Transferable Shares. Shares in a public company can be transferred easily without the consent of other members. In the words of Lord Blackburn,
"When Joint Stock Companies were established the greatest objective was that the shares should be capable of being easily transferred". According to
Section 82, "the share or other interests of any member shall be movable property, transferable in the manner provided by the articles of the company." In
the company, a member may sell his shares in the open market and get back his money, without effecting the capital structure of the company. This
facility encourages the potential investors to invest in shares of Joint Stock Companies and thereby help in the industrial deveiopment.
4. Perpetual Succession. As the company has separate legal existence independent of its memhers, it is not affected by death or insolvency of a member.


It has a perpetual existence. A partnership, on the other hand, is automatically dissolved by the death, lunacy or retirement of a partner, unless there is a
contract to the contrary. In modern industrial era this stability is of paramount importance.
5. Separate Property. The property of an incorporated company is vested in the corporate body. The company is capable of holding and enjoying property
in its own name. No member, not even all the members can claim ownership of any item of the company's assets.
6. Restriction on Purchase of own Shares. An incorporated company limited by shares or guarantee cannot purchase its own shares, except as a
consequence of reduction of capital, redemption of shares or other exceptional circumstances provided in the Act (Sec. 77). This restriction provides
some amount of protection to the interests of creditors and lends stability to the co.mpany. However, the Government has aUowed the companies to buy
back their own shares vide the Companies (Amendment) Act 1999 but subject to certain restrictions.
7. Right to Sue. As a legal person with separate entity from its. members, an incorporated company can sue each other like any other person and it can
also be sued by other persons.
8. Better Management. Management of the company can be vested in professionals and the members of the company can appoint capable persons to
manage the affairs of the company to the geneal interest of the shareholders. 9. A company gets the privilege of collecting money from the public.
10. No Restriction on Members. There is no lin1it on the maximum
number of members a company may have. Large membership makes it possible to collect huge amount of capital it requires for the smooth conduct of
the business.