File Name: advantages and disadvantages of a company .zip
There are some salient features that distinguished a company from other forms of business enterprises.
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Everything you need to know about the advantages and disadvantages of joint stock company. A Joint Stock Company is an incorporated association of two or more persons having a separate legal existence with perpetual existence and common seal.
Its capital is divided into shares which are freely transferable and the owners of these shares have limited liability. It is an artificial entity created by law. A Joint Stock Company is capable of procuring unlimited capital by issuing share and debentures which can be bought both by the classes and the masses. Due to qualities such as limited liability and stability of the enterprise, the Joint Stock Company attracts investors and good managerial talent towards the company.
Thus, a Joint Stock Company is in a better position to meet the growing needs of modern business. Larger Capital 2. Limited Liability 3. Stability of Existence 4. Economies of Scale 5. Scope for Expansion 6. Public Confidence 7. Transferability of Shares 8. Professional Management. Tax Benefits Risk Diffused Social Benefits Greater Borrowing Capacity Promotes Savings and Investment Greater Accountability Greater Adaptability Synergy of Capital and Capability Use of Latest Technology.
Difficulty in Formation 2. Lack of Secrecy 3. Delay in Decision Making 4. Concentration of Economic Power 5. Lack of Personal Interest 6. More Government Restrictions 7. Incapable and Unscrupulous Management 8. Undue Speculation in the Shares of the Company 9. Impersonal Work Environment Numerous Regulations.
Oligarchic Management Conflict in Interests Lack of Motivation and Personal Touch Social Evils Separation between Ownership and Management Fraudulent Promotion and Management Adverse Impact of Large Scale Lack of Continuity Lack of Secrecy and a Few Others.
Larger Capital- The huge capital required by modern enterprises would not be possible under other forms of organisations like sole individual proprietorship and even in partnership. The joint stock company by its widespread appeal to investors of all classes can raise adequate resources of capital required by large-scale enterprise.
Limited Liability- Liability of the shareholders of a company is limited to the face value of the shares they have purchased. It has a stimulating effect on investment. The private property of shareholder is not attachable to recover the dues of the company. Stability of Existence- The organisation of a company as a separate legal entity gives it a character of permanence or continuity. As an incorporated body, a company enjoys perpetual existence. Economies of Scale- Since the company operates on a large scale, it would result in the realisation of economies in purchases, management, distribution or selling.
These economies would provide goods to the consumer at a cheaper price. Scope for Expansion- As there is no restriction to the maximum number of members in a public company, expansion of business is easy by issuing new shares and debentures. Public Confidence- Formation and working of companies are well regulated by the provisions of the Companies Act.
Their accounts are audited by a chartered accountant and are to be published. This creates confidence in the public about the functioning of the company. Transferability of Shares- The shareholders of a public company are entitled to transfer the shares held by them to others.
The shares of most joint stock companies are listed on the stock exchange and hence can be easily sold. Professional Management- The management of a company vests in the directors duly elected by shareholders. Normally, experienced persons are elected as directors. Thus, the available skill is utilized for the benefit of the company.
The company organisation, therefore, is like a bridge between the skill and capital. Tax Benefits- Company pays lower tax on a higher income.
This is because of the reason that the company pays tax on the flat rates. Similarly, company gets some tax concessions if it establishes itself in a backward area.
Risk Diffused- The membership of a company is large. The business risk is divided among several members of the company. This encourages investment of small investors. Difficulty in formation- The legal formalities and procedures required in the formation of a company are many. It has to approach large number of people for its capital and it cannot commence business, unless it has obtained a certificate of incorporation and a certificate to commence business.
Lack of Secrecy- Every issue is discussed in the meeting of the board of directors. In this situation maintenance of secrecy is difficult. Delay in Decision Making- In company form of organisation, all important decisions are taken by the board of directors and shareholders in general meeting. Hence, decision making process is time consuming. Board of directors itself has often to be at the mercy of bureaucracy. Concentration of Economic Power- The company form of organisation gives scope for concentration of economic power in a few hands.
It gives easy scope for the formation of combinations which results in monopoly. Large joint stock companies tend to form themselves into combinations or associations exercising monopolistic power which may prove detrimental to other firms in the same line or to the consumers. Lack of Personal Interest- In company form of organisation, the day-to-day management is vested with the salaried persons or executives who do not have any personal interest in the company.
This may lead to reduced employee motivation and result in inefficiency. More Government Restrictions- The internal working of the company is subject to statutory restrictions regarding meeting, voting, audit, etc. The establishment and running of a company, therefore, would prove to be troublesome and burdensome because of complicated legal regulations. Incapable and Unscrupulous Management- Unscrupulous individuals may bring economic ruin to the community by promoting bogus companies.
The fraudulent promoters may be fool the public to collect capital and misuse it for their personal gain. Misuse of property, goods and money by the managerial personnel may harm the interests of the shareholders and create panic among the investing public. Undue Speculation in the Shares of the Company- Illegitimate speculation in the values of shares of a company listed on the stock exchange is injurious to the interest of shareholders.
Violent fluctuations in the values of shares as a result of gambling on the stock exchange, weakens the confidence of investors and may lead to financial crisis. They are not personally liable. This reduces the degree of risk borne by an investor. Member may come and go, but the company goes on forever. It will only cease to exist only when specific procedure of winding up is followed.
Thus there is greater scope for expansion. The investors are inclined to invest in shares because of the limited liability, transferable ownership and possibility of high returns in a company. Limitations :. Such information is available to the general public also. As a result, it is difficult to maintain complete secrecy about the operations of company. All this process is time consuming and expensive and reduces the freedom of operations.
They adopt various means to get themselves re-elected as directors year after year. Interests of shareholders are overlooked.
Do you want to be a business owner someday? Before deciding, you might want to consider the following advantages and disadvantages of business ownership Small Business Development Center, Being a business owner can be extremely rewarding. Having the courage to take a risk and start a venture is part of the American dream. Success brings with it many advantages:. In spite of these and other disadvantages, most small business owners are pleased with their decision to start a business.
Taking the leap into business ownership leads you through the gamut of emotions, from exciting to terrifying, all at once. Before finalizing your decision to opening your own business, take the time to review the consumer need for your product or services, as well as your ability to fulfill that need. At the same time, consider the advantages as well as the disadvantages of owning your own company. One big enticement for business ownership is reaping the bigger financial rewards. Successful business owners have the opportunity to make more money for the risks they take.
L Introduction A company, in common parlance, means a group of persons associated together for the attainment of a common end, social or economic. It has no strictly technical or legal meaning. According to sec. Thus, a Company comes into existence only by registration under the Act, which can be termed as incorporation.
The liability of shareholders, unless and otherwise stated, is limited to the face value of shares held by them or guarantee given by them. A company has a separate legal entity with perpetual succession. In company business, the management is in the hands of the directors who are elected by the shareholders and are well experienced persons.
Outsourcing is a common practice of contracting out business functions and processes to third-party providers. The benefits of outsourcing can be substantial - from cost savings and efficiency gains to greater competitive advantage. On the other hand, loss of control over the outsourced function is often a potential business risk. You should consider carefully the pros and cons of outsourcing before deciding to contract out any activities or business operations. There are many reasons why a business may choose to outsource a particular task, job or a process. For example, some of the recognised benefits of outsourcing include:. Outsourcing can also help to make your business more flexible and agile, able to adapt to changing market conditions and challenges, while providing cost savings and service level improvements.
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Knowledge management is a systematic approach to capturing and making use of a business' collective expertise to create value.Taibourmountre 08.05.2021 at 22:08
Disadvantages. Limited participation. Returns may be lost. Lack of control. Licensee may become competitor. Licensee may exploit company resources.Michael Y. 09.05.2021 at 23:47
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Everything you need to know about the advantages and disadvantages of joint stock company.Marceliana O. 15.05.2021 at 06:40
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