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Explain any three characteristics of a company.

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Characteristics of a company 

(1) Voluntary association 

At least two persons, voluntarily, must join hands to form a private company, while a minimum of seven persons are required for a public company. 

(2) Artificial person 

A company is created by law. Though, it has no body and no conscience, it still exists as a person, having a distinct personality of its own. Because like a human being it can buy, sell and own property, sue others, be sued by others, hence called as an artificial person. 

(3) Separate legal entity 

A company has an independent status, different from its members. This implies that a company cannot be held liable for the actions of its members and vice-versa. Company has a distinct entity separate from its members. 

(4) Common seal 

Being an artificial person, company cannot sign the documents. Hence, it uses a common seal on which its name is engraved. Putting the common seal on papers is equivalent to that of signatures of a human being, making them binding on the company. 

(5) Limited liability 

The liability of the shareholders of a company is normally limited to the amount of shares held or guarantee given by them. 

(6) Transferability of shares 

No shareholder is forever wedded to the company. Subject to certain conditions, the shares are freely transferable. The private companies do impose some restrictions on the transfer of shares. 

(7) Diffusion of ownership and management 

In this form of organisation, entrepreneur should clearly understand that there exists separation of ownership from management. As the shareholders could be scattered across the country, they give the right to the directors to manage the company's affairs.

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