Q17. Distinguish between corporation and a firm.

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1. Introduction:
The outstanding feature of a corporation is its independent corporate existence. A corporation is in law a person. It is a distinct legal persona existing independent of its members. By fiction of law, a corporation is a distinct entity, yet in reality it is an association of persons who are the beneficial owners of all the corporate property so a corporation on its own is liable to its acts. A corporation is different from the firm as the firm is not considered to be a legal person.
2. Definition Of Corporation:
A corporation is an artificial or fictitious person constituted by the personification of a group or a series of individuals.
3. Meaning Of Firm:
A firm is the relation between the person who have agreed to share the profits of a business carried on by all of them acting for all.
4. Difference Between Corporation And Firm:
Following are the differences between corporation and firm.
I. Legal Entity:
Corporation is a separate legal entity apart from its members.
A firm does not have corporate personality, so it is not a separate personality from its members.
II. Liability:
In corporation, liability of corporation and its members are different.
In firm, partners are jointly liable.
III. Legal Status:
A corporation can sue and be sued.
A firm cannot sue of its own name.
IV. Duration:
A corporation has a perpetual succession even if a member of it dies it continues.
A firm has not perpetual succession. A firm can be extinguished by the extinction of any of its two members.
V. Existence:
A corporation can exist even with one member.
This is not possible in the case of partnership firm. There must be more than one member of a partnership firm.
VI. Contract With Members:
It is possible for a corporation to enter into a contract with its members.
No firm can enter into a contract with its members.
VII. Rights And Duties:
A corporation can have rights and duties different from its members.
This is not possible with the firm.
VIII. Possession Of Property:
A corporation can possess the property different from its members.
The property of the firm is the property of the members.
IX. Base Of Formation”
The base of corporation is voluntary.
Base of formation of a firm is based on the maxim “Consensus Of Idem”, which means consent of both the parties. If both the parties are consenter, they can from a firm.
5. Liability Of Corporation:
A corporation is a separate distinct entity and this fact was firmly established in the leading case.
“Salomon vs. Salomon and Co. Ltd
(1897) A. C 22
“It was held that the company is at law a different person altogether from the subscribers of the memorandum.”
The law provides that a corporation owns both civil and criminal liability, for the acts done by its agents within the scope of their employment.
I. Civil Liability Of A Corporation:
(i) As regards tortuous Act:
A corporation is liable for the tortuous acts of its servants or agents if the act was done within the scope and course of employment and act was within the powers of corporation. This is the rule of vicarious liability.
Citizens life Assurance Co vs. Brown
(1904) A. C 423
“It was held that the corporation was liable for the tort of defamation on the ground that it was liable for the torts of its servants committed in the course of the employment.”
(ii) As regards contractual liability:
General Rule:
Generally a corporation contracts under a seal and the presence of the seal is an evidence of the assents of the corporation.
Exceptions:
(a) An agent is bound to act within the scope of his authority if he wishes the act to bind the corporation.
(b) The capacity of a corporation to act may be limited by the terms of its charter or by the statute creating it. In these cases, any attempt to perform an act beyond those powers would be ultra vires and would have of no legal effect.
II. Criminal Liability Of A Corporation:
Corporation cannot have a guilty intention necessary for a crime as a corporation has no mind of its own. But a corporation can be punished for the offences. This is so when a statutory duty is not performed by corporation or the same is performed badly in these cases punishment is usually by way of fine.
(i) Elements necessary for criminal liability of corporation:
According to Keeton “In crime, the occurrence of three elements is necessary before liability can be property attributed to the corporation.
(a) The crime must be one in which it is not necessary to prove a guilty state of mind in the person charged.
(b) The act must be of a kind that the act or omission of the agent may also be said to be the act or omission of the corporation.
(c) The punishment must be a fine at least as an alternative or some other punishment which may be inflicted on the corporation.
6. Conclusion:
To conclusion, I can say, that corporation is a legal person and its liabilities are different from its members. A corporation is held responsible on the ground that it should not have selected careless and dishonest agents.

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