When a person wants to operate any business or industry, s/he has to establish a firm or company as specified by prevailing law. A company plays very important role to develop the commerce and industry in the world because it is an organization having separate identity from its promoters and it has covered almost all areas of the business. In the contemporary world, all the big type of institutions, organization, insurance, banks, industries etc are operated as companies. To arrange the sufficient finance, to limit the liability, to operate the business as an organized way and to operate the transnational huge business as easy way, the company is as a panacea.
Company is an artificial person that is created, run and ended by the law. The scope of company is wider than that of partnership firm of business. Partnership firm is a suitable device for a small group of partners who take personal interest and there is a mutual trust and confidence among them. The concept of the formation of a company is to outcome of experiences of partnership business and incorporation by registration. In partnership the liability of the partners for the debts of the business is unlimited. They are bound to meet without any limit, all the business obligations of the firm. The company being a separate person, the liability of its shareholders is limited in the context of company. The shareholders are not liable personally.
The concept of a person is great achievement of jurisprudence that enables to deal with someone as a person in the eye of law. Law is the creation of a human being and artificial person is creation of law but in the eye of law there is not so significant difference between them. Only those who are capable to enjoy the rights and fulfill the duty are person in the eye of law, whether natural or artificial. In this sense Law creates the rights and obligation of persons and divides them to two classes:
1. Natural person
2. Artificial person
Natural person: Natural person are the human beings.
Artificial person: Artificial person are those persons created and developed by laws for the purpose of society and government.