What is a company? What are its characteristics? Explain its advantages and disadvantages.

• A company is defined as a voluntary association of people having separate legal existence, perpetual succession and a common seal.
• The company form of organisation is considered to be most suitable for organising business activities on a large scale.
• Once formed, the company becomes a separate legal entity with a distinct name of its own.

The features of company are as follows :

• Compulsory registration
  • A company has to be registered under the Companies Act, 1956. Without such registrations, no company can come into existence.
• Distinct legal entity
  • A company is regarded as a legal entity separate from its members. Thus, a company carry on business in its own name, enter into contracts buy, sell and hold property, sue and be sued.
• Artificial persons
  • A company is the creation of law and has a distinct entity. It is therefore regarded as an artificial person. The business is run in the name of the company. But because it is an artificial person, its functions are performed by the elected representatives of members, konwn as directors.
• Limited liability 
  • The liability of the members of a company is limited. It is limited to the extent of capital by members contributed. Beyond that amount, the members cannot be personally held liable for payment of the company's debts.
• Transfer of shares
  • The capital of company is divided into parts called shares. Normally the shares of a company are freely transferable by its members. However, transferability is restricted in the case of private company.
• Common seal
  • The company has no physical existence. Every company has a common seal with its name engraved on it. Anyone acting on behalf of the company must use the common seal to bind the company.

Advantages of Company :

• Collection of huge financial resources
  • The biggest advantages of a company organization is that it has the ability to collect large amounts of funds.
  • This is because a company can raise capital by issuing shares to a large number of persons.
  • Shares of small value can be subscribed even by people with small savings.
  • Availability of necessary funds makes it possible for a company to undertake business activities on alarge scale.
• Limited liability
  • Another advantage of the company form of organization is the limited liability of members.
  • With the liability of members limited to the value of their shares, a company is able to attract many people to invest in shares.
  • It is thus in a position to undertake business ventures involving risks.
• Growth and expansion
  • With the large sources at its command, a company can organize business on a large scale, once the business is started on a large scale it gives the company strength to grow and expand.
  • This is because of enough profits which accrue from the economies of large scale organisation and production.
• Efficient management
  • Since a company undertakes large scale activities, it requires the services of expert professional managers.
  • Competent managers can be hired by a company because it commands large financial resources.
  • Thus, efficient management is more easily ensured in a company organisation.
• Public confidence
  • A company enjoys great confidence and trust of the general people.
  • Companies have to disclose the result of their activities and financial position in the annual reports that are avaialble to public. 
  • It is on the basis of the annual reports and other information that investment is made in companies.
• Free transferability of Shares
  • A company permits its members to transfer their shares.
  • This provides liquidity to the member's investment.

Disadvantages of Company:

• Lengthy and expensive legal procedure
  • The registration of a company is a long-drawn process.
  • A number of documents are to be prepared and filed.
  • For preparing documents, experts are to be hired who charge heavy fees.
  • Besides, registration fees have also to be paid to the Registrar of Companies.
• Lack of incentives
  • The company is not managed by shareholder i.e., owners, but by directors and other paid officials.
  • Officials do not have investment in the company and also do not bear the risks.
  • As such, they may not be as much motivated to safeguard the interests of the company as the shareholders.
• Oligarchic management 
  • The company management may seem to be fully democratic, but in actual practice, it is oligarchic i.e. control by a small group of persons.
  • People who are once elected as directors of the company adopt various means to get themselves selected over and again. Such individuals often exploit the company for personal interests rather than working in the interest of shareholders.
• Growth of monopolistic tendencies
  • A company because of its large size has the tendency to grow into monopoly so as to eliminate competition, control the market and charge unreasonable prices to maximize profits.
  • The larger the size of a company, the greater is the possibility of it acquiring monopoly power.
• Speculation
  • In speculation, profits are sought to be made by manipulating price of shares without actually holding shares.
  • A company organisation provides scope for speculation in shares by the directors.
  • Because directors have knowledge of all information about the functioning of the company, they can use it to their personal advantage.
• Excessive government regulations
  • A company is subject to government regulation at every stage of its working.
  • A company has to file regular returns and statements of its activities with the Registrar.