Advantages of Company Incorporation

Company incorporation in India is governed by the Companies Act, 2013 and offers a number of legal, financial and operational benefits that have made it one of the most preferred types of business structure.

1. Separate Legal Entity

A company is an independent legal person that is not the same as its members. It is also able to own property, make contracts and run business in its own name without those shareholders that own it.

2. Limited Liability

The liability of members is limited to:

• The amount that is not paid on their shares, or
• The amount guaranteed by them in case of a company limited by guarantee.

Members are not personally liable for the debts of the company.

3. Perpetual Succession

A company has a perpetual existence regardless of the aspect of change of ownership, change of management, death, retirement or insolvency of the members. The company persists till it is legally dissolved.

4. Separate Property Ownership

Its assets and property are owned by the company. Throughout its existence, there is no direct ownership of the company property by the members.

5. Ability to Sue and Be Sued

A company may be sued or initiate legal proceedings on behalf of itself as it is a juristic person under the law.

6. Transferability of Shares

The shares of a business are typically transferable which ensures liquidity among the investors and easy exit opportunity without any business continuity.

7. Investment and Capital Mobilization

The incorporation allows the companies to have numerous investors participate in the company by raising capital through equity, which enhances financial strength and enhancement of business.

8. Professional Management

Companies are managed by qualified professionals and directors, ensuring better governance, structured decision-making, and operational efficiency.

9. Borrowing Capacity

Credibility, structured governance and compliance with regulations give companies increased access to finance by banks and other financial institutions. They are also able to raise funds via debentures and public deposits (under legal permissibility).

10. Tax and Regulatory Benefits

In some instances, there are organised taxation systems, deductions and incentives that would favour companies in regard to the existing laws.

11. Flexibility in Contractual Relations

A company is free to make contracts with its members, directors and third parties and this provides legal certainty and effectiveness.

12. Legal Dissolution Only by Law

Dissolution of a company would only be possible by means of a legal process as stipulated in the Companies Act, 2013 and would facilitate an orderly exit and safeguard of the interests of the stakeholders.