Clarify the advantages and limitations of a company.
Answers
Answer:
Advantages and Disadvantages of a Company Form of Business –...
Limited Liability:
Perpetual Existence:
Professional Management:
Expansion Potential:
Transferability of Shares:
Diffusion of Risk:
Lack of Secrecy:
Restrictions:
More items...
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Explanation:
1. Limited Liability:
The liability of shareholders, unless and otherwise stated, is limited to the face value of shares held by them or guarantee given by them.
2. Perpetual Existence:
Deaths, insanity, insolvency of shareholders or directors do not affect the company’s existence. A company has a separate legal entity with perpetual succession.
3. Professional Management:
In company business, the management is in the hands of the directors who are elected by the shareholders and are well experienced persons. In order to manage the day-to-day activities, salaried professional managers are appointed. Thus, the company business offers professional management.
4. Expansion Potential:
As there is no limit to the maximum number of shareholders in a public limited company, expansion of business is easy by issuing new shares and debentures. Companies normally use their reserves for expansion purposes
5. Transferability of Shares:
If the shareholders of a company are displeased with the progress of the business, they can sell their shares any time. During all this change of ownership, the business continues to operate.
6. Diffusion of Risk:
As the membership is very large, the whole business risk is divided among the several members of the company. This is an advantage particularly for small investors.
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