You must be keen to know why we should form a company for carrying out business?
Obviously, this is because there are many advantages which the company form of business
organization enjoys over other forms of business organization. Let us read about those
advantages.
The main advantages of Joint Stock Company are -
(i) Large financial resources: A joint stock company is able to collect a large amount
of capital through small contributions from a large number of people. In public limited
company shares can be offered to the general public to raise capital. They can also
accept deposits from the public and issue debentures to raise funds.
(ii) Limited Liability: In case of a company, the liability of its members is limited to the
extent of the value of shares held by them. Private property of members cannot be
attached for debts of the company. This advantage attracts many people to invest
their savings in the company and it encourages the owners to take more risk.
(iii) Professional management: Management of a company is vested in the hands of
directors, who are elected democratically by the members or shareholders. These
directors as a group known as Board of Directors ( or simply Board) manage the
affairs of the company and are accountable to all the members. So members elect
capable persons having sound financial, legal and business knowledge to the board
so that they can manage the company efficiently.
(iv) Large-scale production: Due to the availability of large financial resources and
technical expertise it is possible for the companies to have large-scale production. It
enables the company to produce more efficiently and at lower cost.
(v) Contribution to society: A joint stock company offers employment to a large number
of people. It facilitates promotion of various ancillary industries, trade and auxiliaries
to trade. Sometimes it also donates money towards education, health and
community services.
(vi) Research and Development: Only in company form of business it is possible to
invest a lot of money on research and development for improved processes of production,
new design, better quality products, etc. It also takes care of training and
development of its employees.
Obviously, this is because there are many advantages which the company form of business
organization enjoys over other forms of business organization. Let us read about those
advantages.
The main advantages of Joint Stock Company are -
(i) Large financial resources: A joint stock company is able to collect a large amount
of capital through small contributions from a large number of people. In public limited
company shares can be offered to the general public to raise capital. They can also
accept deposits from the public and issue debentures to raise funds.
(ii) Limited Liability: In case of a company, the liability of its members is limited to the
extent of the value of shares held by them. Private property of members cannot be
attached for debts of the company. This advantage attracts many people to invest
their savings in the company and it encourages the owners to take more risk.
(iii) Professional management: Management of a company is vested in the hands of
directors, who are elected democratically by the members or shareholders. These
directors as a group known as Board of Directors ( or simply Board) manage the
affairs of the company and are accountable to all the members. So members elect
capable persons having sound financial, legal and business knowledge to the board
so that they can manage the company efficiently.
(iv) Large-scale production: Due to the availability of large financial resources and
technical expertise it is possible for the companies to have large-scale production. It
enables the company to produce more efficiently and at lower cost.
(v) Contribution to society: A joint stock company offers employment to a large number
of people. It facilitates promotion of various ancillary industries, trade and auxiliaries
to trade. Sometimes it also donates money towards education, health and
community services.
(vi) Research and Development: Only in company form of business it is possible to
invest a lot of money on research and development for improved processes of production,
new design, better quality products, etc. It also takes care of training and
development of its employees.
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