Company can be defined as a group of people associated together for the purpose of carrying business with a motive of earning profit.
The word ‘company’ is derived from the Latin word “Com” which means ‘With or together’ and Panis means ‘Bread’ and it was originally referred to an group of persons who took their meals together.
Section 3(1)(i) of the company act provides that,’ A company means a company formed and registered under this Act or an existing company laws’. It means that company registered under the company Act 2013 or earlier existing company laws before it.
Lord Justice Lindley defines it as follows:” A company is an association of many person who contribute money or money’s worth to a common stock and employ it in some trade or business and who share the profit and loss arising therefrom”.
Whereas Partnership” is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.
According to Chief Justice Marshall,” a corporation is an artificial being, invisible, intangible, existing only in contemplation of the law. Being mere creation of law, it possesses only the properties which the charter of its creation confers upon it, either expressly or as incidental to its very existence”.
Hence it is clear by above definition that a company is artificial person created by law. It comes to existence with its registration under the Act.

Characteristics of Company

The most distinguishing characteristics of a company are:

1. Incorporated association 

As per the company law, a company is created when it is registered under the company Act. It comes into existence from the date of its incorporation. At the time of incorporation, it is necessary for a private company to have minimum of 2 member and minimum 7 for public company.

2. Artificial person 

A company is artificial person; in that sense it is created by a process of law not by natural birth and it is not a natural person like human. But on the other hand, it is clothed with many of the right of a natural person.
A company cannot take Decision on its own, it has to act through a board of directors elected by shareholders. In Bates v. Standard land Co (1910 2CH. 408 at p.416.) that ‘Board of directors are the brain and the only brains of the company, which is the body and the company can and does act only through them’.
Like a natural person it cannot take oath, cannot appear in its own person in the case, cannot be sent to jail. But the company has right to acquire and dispose of the property, to enter into contract with stranger and can sue and be sued in its own name.

3. Separate legal entity

A company is a legal person having a Juristic personality entirely distinct from and independent of its members. (Kathiawar Industries Ltd. C.G. of Evacuee Property A.I.R (1966) Punj.337)
It means that the creditor of the company can sue only the company to recover their debt not the members. Similarly, the company is not liable in any way for the individual debts of its members.
With the incorporation of the company, the company is separated or a separate new person is born in the eyes of law, now for every liability incurred by company, company will be responsible but the member.
Now the company has right to own and transfer the title of the property, way it likes. No member or person can claim joint ownership of the company property. It can be sued and can sue in its own name.
Separate legal entity of the company is also recognized by the Income Tax Act, where a company is required to pay Income Tax on its profits and when these profits are distributed to shareholders in the form of dividend, the shareholders have to pay income tax on their dividend income. This proves that a company and its shareholders are two separate entities.

4. Not a citizen

A company is a legal person having nationality in accordance with the country it is Incorporated and a domicile in accordance with the place or state it is registered in, but it isn’t a citizen of that place.
According to Citizenship Act, Citizenship can be acquired by only a natural person that means it cannot be acquired by artificial person created by the law, although companies enjoy few of the fundamental rights addressed in constitution.

5. Perpetual existence/ succession

A company has a perpetual succession and is independent of the life of its members. The life of a company does not depend upon the death, insolvency or retirement of any or exit of any shareholder.
Perpetual succession thus means that in spite of any change in the membership of the company, the existence of the company is not affected. Since the company is created by law, only law alone can dissolve it.

6. Common seal

A company being an artificial person cannot sign a document for itself. It cannot act on itself, it acts through the natural person (directors or board of directors).
But having legal entity it can be bound by those documents which bears its Signature; therefore, law has provided the provision of using Common Seal with the name of the company engraved on it, is used as substitute for its Signature.
No document issued by company will be binding on it without the presence of common seal on it.

7. Limited liability

One of the important advantages of a company is that the liability of it is limited to the amount unpaid on their shares, howsoever heavy losses the company might have suffered, members are liable to the unpaid amount. However, the Act doesn’t prevent the companies from making liability on their member unlimited, but such company are rare in existence.

8. Transferability of Shares

The shares of the public company are freely transferable and member can dispose of their share whenever they like to without seeking permission from the company but the shares of private company are not freely transferable in general public, they are owned by few individuals and carry few restrictions upon transfer of this shares.

9. Capacity to sue and being sued

With the existence of the company, the company acquire right to sue any person or get sued by any person on the breach of its legal duties.

10. Separate Property

A company being a legal person can hold, purchase and sell property in its own name. A member of the company doesn’t have direct light in the ownership of the property acquired by the company. The property of a company should be used for the purpose of the company not for the personal use of its member or directors.