Legal Structure of Business Organisations

Legal Structure of Business Organisations

The Companies Act 2017 has provided some additional classifications of companies and has altered the names of others. There are various business forms, the Companies Act, 2017 hasn't covered all.  The overall structure of the business organization as follows;

Distinctive Features of Company

·         They are the corporations

·         The liability of the members to contribute towards the payment of company debts is limited

·         Perpetual succession

·         Common Seal

·         Transferability of shares

·         Separation of ownership and management

Advantages and Disadvantages of Incorporations and Registered Companies

Section 427 gives the meaning of unregistered companies in the context of winding up. The incorporation of any company comes with the registration of the company because that is the state that gives a company corporate personality.

Advantages of incorporation

·         Makes a company a distinct legal entity

·         Limited liability

·         The company is not affected by the death or insolvency of a member

·         Tax advantages

·         It distributes the income among the family members without splitting up the assets

·         Companies share can freely be transferred

·         With growth, the company can adopt different organizational forms

Disadvantages of Incorporation

·         Companies are usually difficult and require a lot of formalities to form

·         Costly to be formed

·         Government interference and submission of reports

·         Maintenance of books and requirements of audit

·         The separation between ownership, management, and loss of touch

·         Neglect the participation of minority

·         Difficult to wind up

 Reference: Imran Ahsan Khan Nyazee, M.Ibrahim Abdullah Khan Nayazee, Company Law 2019