Unlocking the Power of Corporate Form: Exploring the Advantages of Incorporation

  • Shruti
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  • Shruti

    Student at Xavier Law School, St, Xavier's University, Kolkata, India

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A company is a “legal person” or “legal entity” which possess the potential to outlive its members unless liquidated either voluntarily or compulsorily. In essence, a company has a separate identity from its members. However, a corporation cannot be viewed exclusively as a legal entity. Instead, it is a legal device used to achieve a social or economic goal. With incorporation comes the concrete principle of separate legal entity and it is by virtue of this concept that incidents or consequences of incorporation holds ground. A business organisation, by incorporation, can limit their liability in respect of the debts thus reducing risk of potential charge by the creditors over their personal assets. However, over the years, there have been instances where the rule of separate legal entity was bypassed to reveal the true persons behind the corporate entity. In such circumstances, the rule of separate legal entity ceases to apply and the corporate entity becomes equivalent to its members. It is only under exceptional circumstances that the rule of separate legal entity is not honoured and the corporate veil is lifted. It cannot be stressed enough that in every possible circumstance, the sanctity of separate legal entity is to be maintained i.e., an incorporated body is to be treated as a separate entity independent of its members unless an exceptional circumstance crops up.




International Journal of Law Management and Humanities, Volume 6, Issue 3, Page 3288 - 3295

DOI: https://doij.org/10.10000/IJLMH.115225

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