Company and Its Basics
Company is a common word that one may hear in their day to day-to-day life. But the point is what does it mean? So, a company is a separate legal entity which is an organised structure where the business usually takes place. A company can be established by navigating towards the established procedure as prescribed under law. However, certain stages need to be completed when it comes to the formation of the company. The company structure must be simplified because it contributes to the conducting of business smoothly. Also, the continuance of the company depends upon its structure as it helps achieve its decided objectives.
Coming legal arena, where the Companies Act, 2013 provides a comprehensive framework for a company when its formulation, regulation and dissolution are considered. It states how a company should be structured as well as managed to comply with legal compliance, operational efficiency and corporate governance. However, it is very necessary to understand the intricacies of the company so that a strong foundation can be built from the beginning itself. So, today the discussed topic would be the structure of the company along with the roles and responsibilities of shareholders, directors and executive management.
Various Kinds of Companies
Since the formation, regulation and dissolution of companies have been prescribed under the Companies Act, 2013. However, the purpose of various existing companies is that every business has its own needs and structure. Similarly, every company serves a distinct purpose tailored to the business’s specific needs. Therefore, going through the types of companies below-
Sole Proprietorship
The first type of business organization is the sole proprietorship which is the most common form of company. It is owned and operated by the individual. Unlike other business structures, here no legal distinction exists between the owner and business therefore making it easy to establish and operate. Here, the owner has complete discretion over the decision making and that’s why it leads to having complete hands over the profit. But at the same time, the burden of loss is also on the owner in case of any mishappening. However sole proprietorship does not need to comply with company registration in india.
Partnership
Another form of business organisation is the partnership. A partnership means a collaborative business structure where two or more individuals come together to share the ownership as well as the responsibilities. In comparison to the proprietorship, the partnership allows the pooling of resources, skills and expertise to enhance the business capabilities and growth potential. However, partnerships have also been divided into different categories under the Companies Act, 2013 which are general partnerships and limited liability partnerships (LLP). A partnership is a company structure that needs to follow all the legal compliance as prescribed under the Companies Act, 2013.
Corporation
if the business is huge then the corporation must be chosen as it is a different types of business ownership, which is a legal entity separate from its owners, providing limited liability protection to shareholders. Here the share can be issued in the market to raise capital for the business and this makes it the preferred choice for the large enterprises. Here like the partnership, corporations have also been divided into private and public companies. Private companies have restrictions on share transfers and a limited number of shareholders but public companies can issue shares to raise funds through the stock exchange but are subject to a compliance obligation.
Limited Liability Company (LLC)
One of the types of business is the Limited Liability Company which provides the benefits of a combined structure including a partnership and a corporation. The flexibility of partnership along with the benefit of protection to its partners ensures that personal assets are shielded from business debts and other obligations. As earlier discussed, an LLC is a separate legal entity that is capable of owning property, suing and being sued in its name. The management of the business is quite flexible permitting the partners to manage the business without fulfilling the formalities in the corporation
Non-profit Organization
There are various types of business firms and one of them is the Non-profit Organization which are also called as section 8 companies. The purpose of these companies is to promote arts, commerce, education, charity, environmental protection, and other social causes. Since the aim of the section 8 companies is not to earn profit rather any income or surplus amount must be reinvested into the company to fulfil the organization’s objectives. Also, these companies have exemptions from certain taxes and simplified compliance requirements provided they strictly adhere to their charitable purpose. The basic criteria to form a Section 8 company, the founder must obtain a certain license from the central government by demonstrating their activities aligning with the social objectives.
Basic Components of Company Structure
Shareholder
- Shareholders also known as a stockholder is an individual that owns shares of the company. They are partial owners as they own certain shares of the company and the ownership is dependent on the number of shares. Shareholders have various roles to play including providing capital for the company and voting on major decisions holding high significance.
- Apart from that they too have various rights as the partial owners of the company and those rights include the right to vote on important matters and, the right to dividends where the shareholders are entitled to obtain the profit from the company’s profit. Also, the shareholders have the right to get information from the company on important matters including financial statements, annual reports and other disclosures. If any further information is needed regarding the corporation and its other aspects then one can take suitable Corporate Legal Services.
Board of Directors
- A group of individuals elected by the shareholders are known as the Board of Directors, whose job is to oversee the management and strategic direction of a company. The composition of the Board of Directors may include executive and non-executive directors. The primary role of the Board of Directors is to set strategic direction where they are supposed to define the company’s vision, mission long-term goals etc.
- Also, the board is responsible for the appointment as well as evaluation of the performance of the CEO and other senior management ensuring success. Directors also need to oversee the company’s risk management policies and practices and mitigate those risks that could impact the company’s performance. On the other hand, if the responsibilities of directors are considered then they must act in good faith, with due diligence and in the best interest of the company.
Executive Management
- Last but not least, the executive who is a high-level manager in a company. An executive is a senior manager who holds significant authority and responsibility within a company. The position usually includes titles like Chief Executive Officer (CEO), Chief Financial Officer (CFO), Chief Operating Officer (COO), and Chief Marketing Officer (CMO), among others.
- The basic role of an executive is to think about the company’s betterment, setting its goal and ensuring long-term growth and sustainability. They provide direction to the company by making major corporate decisions, etc. Their responsibility includes strategic planning including the company’s long-term vision and strategy, also they are supposed to make high-level decisions on the policy and strategy of a company.
How Vera Causa Legal can help an entrepreneur in establishing their company for new business
Absolutely one of the most asked questions that needs to be answered. How Vera Causa Legal can help their entrepreneurial client to establish a company for their business. So the answer lies in various factors because when a person wishes to establish a company then he needs to comply with a lot of legal and other obligations which is quite difficult. But in the end, those obligations need to be followed. So, below are briefly discussed some of the ways how it can be done-
- Advice for Business Structure- The first and foremost job of a law firm is that they must advise their client regarding the appropriate legal structure. To decide the appropriate legal structure, the business model must need to be understood.
- Registration and Compliance- It is a crucial aspect, because if there are mistakes in the basics of a company establishment then it will go long and hamper the client in future. So, Vera Causa Legal will make sure that the registration process, obtaining licenses, and regulatory compliances are followed correctly to avoid any future trouble.
- Contract Drafting- When a business is being started and the company is established then it is important to draft all the agreements, employment contracts and other documents essentially in a way that is required. So, for that one should go with top law firms in india like Vera Causa Legal where the attorneys are well versed in subject matter to guide their clients most appropriately.
- Intellectual Property Protection- When the business mode is sensitive, means there are intangible properties which are owned by the companies.Then Vera Causa Legal will be your best partner as they have domain experts who will help the client in securing their trademarks, copyrights, patents and other valuable products.
- Funding and Financing- Finance, is one of the most important topics which needs to be taken care of in a better way. So, advocates at Vera Causa Legal will make sure that there is proper planning in place so that the functioning of the company can be carried out easily.
Written by Hitarth Shekhar