Company Law

What is Company Law?

Company law is the field of law concerning companies and other business organisation. this includes corporation, partnership and other associations which usually carry on some form of economic. 

Section 3(1) of the Company Act, 1956 defines Company as "Company means a Company formed and register under this act or an existing Company".

According to Haney "A Company is incorporated Association, which is an artificial person created by law, having separate entity, with a perpetual succession and a common seal".

According to Marshall " A company is a person, artificial, invisible, intangible, and existing only in the eyes of law. Being a mere creature of law, it possesses only those properties which the charter of its creation confer upon it, either expressly or incidental to its mere existence". 

There are main form of business organisation 

Sole Proprietorship 

Sole proprietorship is an incorporated business with one owner who pays personal income tax on profits from the business. As an economic until he/she is helpless since he/she can be made personally bankrupt for his/her business trade. Most of the sole proprietors do business under their own names because creating a separate business or trade name is not necessary. Sole proprietorship is also known as "proprietorship". Example of sole proprietorship are computer repair service, catering company, landscaper, financial planners. 

Advantages of a Sole Proprietorship 

• Easy and helpless to form - a sole proprietorship is the simplest and least expensive business structure to establish. Costs are minimal with legal costs limited to obtaining the necessary license or permits.
• Easy tax preparation - the business is not taxed separately, so it is easy to fulfil the tax sporting requirements for a sole proprietorship. The tax rates are also lowest of the business structures. 
• Complete control - because is sole owner of the business, so, will have complete control over all decisions. The owner should not consult with anyone when need to make decision or what to make a changes in business. 

Disadvantages of a Sole Proprietorship 

• Unlimited personal liability - because there is no legal separation between the owner and the business, the owner must be held personally liable for the debts of the business. This risk extends to any liabilities incurred as a result of employee action.
• Heavy burden - the flip side of complete control is the burden and pressure it can impose. The owner are alone responsible for the successes and failures of the business.
• Hard to rase money - sole proprietorship often face challenges when trying to raise money. Because the owner can not ell stock in the business, investors will not often invest. Bank are also hesitant to lend to a sole proprietorship because of a perceived lack of credibility when it comes to repayment if the business fails. 

Partnership 

Partnership is the relation of two or more persons carrying on a business in a common view to make profit. Each partner contributes to all aspects of the business, including money, property, labor or skill. The partner also must shares in the profit and losses of the business. There are three general types of partnership arrangements which are general partnership, limited partnership and joint ventures.  

Advantages of a Partnership 

• Easy and inexpensive - partnership are normally an inexpensive and easily formed business structure. The majority of time spent starting a partnership often focuses on developing the partnership agreement. 
• Complementary skills - a good partnership should reap the benefits to being able to utilise the strengths, resources and expertise of each partner. 
• Shared financial commitment - each partner is equally invested in the success of the business. Partnerships have the advantage of pooling resources to obtain capital. This could be beneficial in terms of securing and expertise of each partner. 

Disadvantages of a Partnership

• Disagreements among partners - with multiple partners, there are bound to be disagreements partners should consult each other on all decisions, make compromises, and resolve the problems. 
• Shares profits - because partnership are jointly owned, each partner mush share the successes and profit of their business with the other partners. 
• Joint and individual liability - is similar to sole proprietorships, partnerships retain full, shared liability among the owners. Partners are not only liable for their own actions, but also for the business debts and decisions made by other partners. In addition, the personal assets of all partners can be used to satisfy the partnership's debt.

Limited Company

A limited liability company, quite simply is a company whose liability is limited. That is the short version. The longer version is that a limited company is a type of company which when set-up allows an entrepreneur to keep their own assets and finances separate from the business itself. This means that people who have invested in the business are only responsible for ant company debts up-to the amount that they have invested. There are two types of limited company which are public limited companies and private limited companies. 

Unlimited Company

Unlimited company is one, which the liability of the members is nit limited in anyway. When a company is wound up every present and the past member is liable to contribute to the assets of the company an about sufficient for the payment of its debts and liabilities and the cost changes and expenses. An unlimited company may also be useful where a company is requires for a specific transaction and unlimited liability is not regarded as a problem, or for a business where the risk of insolvency is very low or non-existent.