Why a Company is Incorporated?

To prevent the mischief arising from large trading undertaking being carried on by large fluctuating bodies, so that persons dealing with them would not know with whom they are contracting and so might be put to great difficulty and expanse. This was a public mischief to be redressed. One difficulty relating to unincorporated bodies was regarding the power to sue or be sued. The second and most important disadvantage of the absence of incorporation was that members could not limit their liability.

In view of the above the Companies Act 1994 in its Section 4 prohibits partnership exceeding certain numbers and encouraged to form company and registered/incorporate under this Act. 

Consequences of Incorporation :

• An Incorporated company has an artificial personality distinct its members.
• A Company incorporated under the Act is an artificial person recognized in the eye of law.

Advantages of Incorporation :

• company incorporated/registered under the Companies Act having a legal entity
• company getting a legal management tools to manage its discipline
• Interest of the investors are protect by law
• liability of the members are limited to the unpaid nominal value of their shares and in practice their share are likely to be fully paid up so that they will be under no further liability.
• A limited liability company can sue and has perpetual succession.
• Its shares can be made transferable without disturbing its personality

 Disadvantages of Incorporation :

• company incorporated/registered under the Companies Act must have its accounts audited as per law
• holding meetings such as board meeting, statutory meeting, general meeting as per Act regularly required submission of various returns to the Registrar of Joint Stock Companies
• A limited liability company be sued in its name