Caliphate is an Islamic term, which denotes a form of Islamic government led by a caliph (a person considered a political and religious successor to the prophet Muhammad) -may the peace and blessings of Allah be upon him- and a leader of the entire Muslim community.
An in-depth research into the Sunnah of the holy prophet of Islam(peace and blessings of Allah be upon) reveals that caliphate is left to the choice of the Muslim Ummah. The best among them is selected to govern the affairs of the Ummah. This is further supported by the action of the Sahaaba (may Allah be pleased with them) after the demise of the prophet Muhammad (peace and blessings of Allah be upon him) and this is what the Sunni Muslims are upon. This is so because the caliphate of the first four caliphs was based on several procedures such as designation, Shurä (consultation) and Bay'ah (pledge of allegiance) and never was it based on familial connection to the Prophet Muhammad (peace and blessings of Allah be upon him).
From the Shi'a point of view, the right to caliphate, after the death of the Prophet, should be vested in only those who have familial connection to the prophet (peace and blessings of Allah be upon him). Hence, they claim that the caliphate is automatically transferred to Ali (may Allah be pleased with him) and his descendants after the death of prophet Muhammad. The effects of this belief is the strange views they held about the rest of the companions of Prophet Muhammad who gave their oath of allegiance to the caliphate of Abubakar, Umar and Uthman (may Allah be pleased with them). They apostatized them and disregarded the lofty status they have in Islam.
This claim also led to the many divisions among the Shia religion today. They are divided into several divisions mainly the Imämiyyah and the Ismadiliyyah or the Seveners. Other divisions were also of great importance, such as a group of more radical Shi'is, al-Kaysäniyyah, and the most moderate and the closest to the Sunni teachings, al-Zaydiyyah. The existence of these divisions was the outcome of disagreement in claiming their own candidate to the imämah (caliphate) and argued over the total number of the appointed imäms. Moreover, their dogmatic doctrines, such as the belief in the return of the Mahdi, were also among subjects of their arguments. The devastating effect of this Shia concept of caliphate is still felt today from their hatred towards the rest of the Muslims who held the correct opinion about the concept of caliphate in Islam.