Arasu,
The incorporation offers certain advantages to the business community as compared with all other kinds of business organisation.
Benefits : I Independent corporate existence
1. A partnership firm has NO existence apart from its members. it is nothing but a COLLECTION of the PARTNERS. A company on the other hand, is in law a person. in Legal terms, it is distinct legal persona existing independent of its members.
2. By incorporation under the Companies Act, the company is vested with CORPORATE PERSONALITY which is distinct from the persons who composed it. Once you register as a company you will be getting the "Certificate if Incorporation", issued by the Registrar of Companies. the person who are the members of the company are called the "Body Corporate"
3. Hence, for example, You & two of your friends convert your Partnership in to company, that means you are dissolving your partnership and establishing a company, the establishment becomes separate from you and you are separate. So the company will be given a Name and you are just the members of it. Here you establishment is a Company or person (legal person, not a natural person like you, but a person) you as members become Body Corporate.
II. Limited Liability
1. The privilege os limiting your liability for business debts is one of the principal advantages of a company.
2. When the company it self is a person, it is the owner of its assets and bound by its liabilities. the members are neither the owners of the company undertakings not the liable for its debt.
3. In Private limited Company, in case of debts, you are liable only to the extent of your guaranteed amount, say when you had agreed to pay only Rs. 5000/- as your share towards the liability, then you are liable only up to 5000/- and not anything more than that. That is in case of Private Company Limited by Guarantee.
In case of Private Company Limited by Shares , you are liable only the extent of the Nominal Value (the face value, the initial value fixed for a share) of the Shares .
4. In a Partnership, if you under go loses you are bound to meet them, how much ever the loss is..... without any limit, and bound for all the business obligations...
So one os the primary accepted reason for incorporating/ establishment is to limit personal risks, obtaining the benefit of limited liability...
III Perpetual succession
1. Natural person dies right, but the incorporated company, a legal person never dies untill you wind up the company.
2. the members of the company may keep changing the company will not change it will the same, hence the changing in membership does not affect the the company's continuity. it is permanent........
IV Separate property
1. When company is a legal person it is capable of owning, enjoying and disposing of the property in its OWN NAME. the company is the owner of its assets, not the share holders.
2. the company is a real person in which all its property is vested, and by which it is controlled, managed and disposed of... No member or a share holder has any interest or right in any item of the property owned by the company, has no legal or equitable interest..........
3. but in case of partnership firm, the partners are the owners of the property of the firm and can do anything with that property and equally liable for its consequences......
V Transferable shares
1. the shares or debentures or other interest of any member in a company is a movable property and transferable in the manner provided by the company. Thus you can transfer, sell or buy the shares or any interest in the in a company.
2. on the other hand a partner you can not transfer you partnership interest in the firm....... that is you as a partner can not give off your rights or liabilities, which are derived from partnership, to another...
VI Capacity to sue and be sued
That means, since it is a person and has its own individual identity can deal the legal and judicial matter in its own name ......
if you want to file case again the the company, then it will be Arasu Vs. The HJK privite limited company.
The HJK Pvt. Ltd Co. VS BSSV......
VII Professional Management
1. When there is no human employer, it is the company which hires you as a manager, you will not find any human or share holders control on you........ hence they fell independent and act professional in delivering their management skills....
VIII Finances
1. you as a natural person can not raise the capital from the public, can you ??
hence, you are, the natural person, in a partnership firm, also can not raise the funds or capital from the public subscription in any way, either shares or debentures....
2. but it is the only the Legal person, the company is the only medium of organising business which is given the PRIVILEGE OF RAISING CAPITAL BY PUBLIC SUBSCRIPTIONS either by shares or debentures.......
3. the financial institutions lend their resources more willingly to companies that to other forms of business organisations.
Thus these are the benefits of converting partnership firm in to/ or establishing a corporate or a company.
Hope the info is sufficient for you........
regards,
Sreevidhya BS