A company is a formally organized group of people created to conduct business. It is a separate legal entity with its own name from the members who make it up. With its own assets, its members (shareholders) cannot claim its assets as their own. The firm has the ability to sue and be sued. It is a legally recognized entity that provides services and goods to customers. In capitalist economies, businesses are central, with the majority of them being privately owned and founded to make a profit that will increase the wealth of their owners while also growing the firm. One of the key objectives of business operators and owners is to receive or generate a financial return in exchange for labor and risk acceptance. State-owned firms and cooperative enterprises are notable outliers.

A company is a legal entity formed by adhering to the Companies Act, 2015 of the Kenyan Laws. In legal theory, the term “company” refers to a group of people who band together to pursue a shared goal or goals.

Company Characteristics

A business has numerous different characteristics that combine to make it a one-of-a-kind entity. However, the following are the basic characteristics of a business:

1. Separate Legal Entity: Incorporation legislation establishes a company as a separate legal entity from its members. In law, the corporation is distinct from its members. Its assets and liabilities are independent and distinct from those of its members, and it has its own seal and name. It can own property, incur debt, borrow money, hire people, open a bank account, enter into contracts, and sue and be sued individually.
2. Limited Liability: The members’ responsibility is restricted to their contributions to the company’s assets up to the face value of their own shares. A member is only responsible for the uncalled money owing on the shares he owns. If the firm’s assets are insufficient to cover its liabilities, creditors might require the partners to make up the difference with their personal assets. This is not possible in the case of a corporation once the members have paid all of their dues on the company’s shares.
3. Perpetual Succession: Unless it is officially wound up or the objective it was founded has been finished, a corporation does not cease to exist. A company’s membership may change from time to time, but this has no bearing on the company’s survival. The company’s existence is unaffected by the insolvency or death of a member.
4. Can own property in its own name: A corporation is a separate legal entity thus can own all its assets in its own name. However, during the company’s existence, no member can claim ownership of the company’s assets.
5. Shares’ Transferability: A corporation’s shares are freely transferable, subject to specific criteria. Therefore no shareholder is permanently or obligated to stay with the company. Instead, when a member transfers his or her shares to another individual, the transferee assumes the role of the transferor and inherits all of the transferor’s rights in those shares.
6. Common Seal: A corporation is an artificial person with no physical presence. As a result, it carries out its activities and enters into numerous agreements through its Board of Directors. The company must seal contracts of this nature. The company’s formal signature is the common seal. On the common seal, the company’s name must be carved. Any document that does not bear the company’s seal is unlikely to be recognized as authentic and has no legal standing.
7. Can sue and be sued in its own name: Unlike its members, a company can sue or be sued in its own name in the courts of law.
8. Separate Management: The Board of Directors, the firm’s management team, administers and manages the company. The shareholders are merely the owners of the company’s stock and not necessarily the company’s management.
9. One share, One vote: The principle of voting in a company is one share-one vote, i.e., if a person has 10 shares, he has 10 votes in the company. This is in direct distinction to the voting principle of a cooperative society where the “One Member – One Vote” principle applies, i.e., irrespective of the number of shares held; one member has only one vote.