Explain the merits of a company.
Explain the merits of a company.
1. Limited liability : The liability of the shareholders is limited to the extent of the amount paid on the shares held by them. Beyond this, they cannot be held liable for company's debts.
2. Transfer of interest : The shares of a public limited company can easily be transferred and can also be sold in the stock market.
3. Perpetual existence : Since a company has a separate legal identity distinct from its members, the death, insolvency, retirement or insanity of any member does not affect its existence. The company can be brought to an end only through the procedure of law.
4. Scope for expansion : A company can arrange for large financial resources as compared to other forms of business organisations i.e., sole proprietorship, partnership, etc. In case the company need more funds, it can raise additional capital from the public by issuing shares or debentures. Arranging for funds through loans from banks and financial institutions is much easier here than in any other form of business organisation.
5. Professional management : A company has huge financial resources, therefore, it is able to employ people who are experts in their respective areas of specialisation. On the basis of different activities performed, the company has various departments. Each department undertakes its operations under an expert who is known as head of that department.
6. Incorporated body : A company comes into existence only after its registration under the Companies Act which requires a number of legal formalities.
1. Limited liability : The liability of the shareholders is limited to the extent of the amount paid on the shares held by them. Beyond this, they cannot be held liable for company's debts.
2. Transfer of interest : The shares of a public limited company can easily be transferred and can also be sold in the stock market.
3. Perpetual existence : Since a company has a separate legal identity distinct from its members, the death, insolvency, retirement or insanity of any member does not affect its existence. The company can be brought to an end only through the procedure of law.
4. Scope for expansion : A company can arrange for large financial resources as compared to other forms of business organisations i.e., sole proprietorship, partnership, etc. In case the company need more funds, it can raise additional capital from the public by issuing shares or debentures. Arranging for funds through loans from banks and financial institutions is much easier here than in any other form of business organisation.
5. Professional management : A company has huge financial resources, therefore, it is able to employ people who are experts in their respective areas of specialisation. On the basis of different activities performed, the company has various departments. Each department undertakes its operations under an expert who is known as head of that department.
6. Incorporated body : A company comes into existence only after its registration under the Companies Act which requires a number of legal formalities.
