Body Corporate: Everything You Need to Know
Body corporate is a specific type of business structure that provides company with a distinct legal identity that completely separate from that of its owners.3 min read
2. Definition of Body Corporate
Body corporate is a specific type of business structure that provides the company with a distinct legal identity that is completely separate from that of its owners or members.
Difference Between Body Corporate, Company, and Partnership
When you start a new business, one of the first things you'll need to do is decide what kind of business structure you're going to adopt. Your chosen business structure will have an effect on a number of different aspects, such as:
- How your company is taxed
- Liability exposure
- How your company will be run
Companies can be thought of as a type of business organization. In other words, your company is an association of people that has been set up for the purpose of conducting business in your chosen market. Companies are considered to be completely separate legal entities from their owners or members and are governed by laws outlined in the Companies Act of 2013. They can be considered artificial people and have their own perpetual succession as well as a common seal.
Companies are confused with corporations on a fairly regular basis. A corporation is also known as a body corporate that can be registered inside or outside a country's borders and jurisdiction. In the past, the term corporation has been used to describe large companies that maintained a presence on a global scale. A company, on the other hand, has a somewhat limited scope, and the business a company represents is normally physically present in the country it is registered in.
If you're not sure which business structure is right for your situation, it may be helpful to examine the five most prominent differences between partnerships, companies, and corporations:
- The cost of starting up
- Potential liability
- Tax scenarios
- Management structures
A corporation's structure is quite different from that of a partnership company. Corporations are usually more complex and involve more people in decision-making processes. Partnerships, on the other hand, normally involve a much smaller number of people, as few as two, that share in the ownership of the company.
Setting up a corporation can be significantly more expensive than setting up a partnership. A corporation requires a minimum of the following to set up:
- Lots of administrative fees
- Complex legal and tax requirements
- Articles of Incorporation
- Local and state licenses or permits
In contrast, a partnership's formation is much less complex. Usually, all that is required to form a partnership is registering the business with local state authorities and obtaining the required licenses or permits to operate in your market.
The members of a partnership are generally held personally liable for any debts or legal obligations accrued by the business they are operating. Simply put, this means a partner's personal assets may be targeted if it becomes necessary to pay off a company's debt. To this end, a partnership agreement will normally outline what percentage each partner is responsible for in the business. This percentage may vary from one partner to another. Corporations, in contrast, don't hold individual owners or members liable for any debts or legal obligations the company accrues.
Definition of Body Corporate
The term corporation is most commonly used to describe what the Indian Companies Act of 2013 defines as body corporate. The act further defines that body corporate entities can be incorporated inside of a company or outside of its jurisdiction. However, body corporate excludes the following:
- Cooperative societies
- Sole corporations
- Corporations that notify the central government's official gazette of formation
This can include but is not limited to:
- Private companies
- A single personal company
- Small companies
- Limited liability partnerships
- Foreign companies
Corporations are business organizations that maintain a separate legal identity from that of any of its owners. A corporation can be sued in its own name and, in the event that this happens, the members of the company will be exposed to limited liability for the legal action being pursued against the company. In addition, according to the Income Tax Act of 1961, any revenue generated by the corporation is subject to a corporate tax.
A corporation, or body corporate, includes companies that are formed either inside or outside of India's jurisdiction. Body corporate does not, however, include the following:
- Cooperative societies registered under any laws that pertain to their specific type of business structure
- Other companies that are not defined by the Companies Act of 2013 that the central government chooses to specify
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