The advantages of the company are as follows:
Unlike sole proprietorship and partnership, the company has a limited liability. The liability of owners, who are known here as shareholders or stockholders, is limited to the amount invested by them in the business. Their private property is safe and cannot be utilized in the discharge of the debts of the company.
Transfer of Ownership
The ownership or shares of the company are easily transferable. They can change hands without liquidating the company. Their shares are bought and sold on the stock exchange freely. This advantage cannot be enjoyed by a sole proprietorship or a partnership.
Efficiency of Management
Shareholders cannot participate in the management of the company. They elect a board of directors as their representatives who hire a team of experts, skilled, and qualified personnel by whom the company is run. Efficiency of management is achieved by these competent and qualified personnel, The services of such competent persons are obtained by offering them career jobs, high salaries, attractive perks and allowances because the company can afford these expenses.
The company is large in capital, volume of business, number of employees, and other financial resources. The sole proprietorship, on the other hand, is small in financial and human resources. Its capital is merely limited by the contribution of a single owner. If needed, the capital cannot be increased significantly. In partnership too, capital is limited by the contribution of the partners. But it enjoys a better and more flexible position than the sole proprietorship because capital can be increased by admitting more partners. But still this flexibility is incomparable with the company where unlimited amount of capital can be increased according to its needs.
Ease of Expansion
Sole proprietorship can not expand without changing its form. Partnership can be expanded by one or two new partners’ admission rendering the old one dissolved. But a company has an unlimited opportunity to expand its capital and operations. It can raise any amount of funds which shareholders arc willing to invest. Unlike partnership, this expansion or change does not lead the company into liquidation.
Unlike sole proprietorship and partnership, the company has unlimited life. It can not be liquidated by admission, retirement, insanity, bankruptcy, or death of a shareholder.
The company has a legal status. It can sue and can be sued. It can enter Entity into agreement in its own name. On the other hand, a sole proprietorship or partnership has no legal status. They can not sue or be sued in their names. Nor can they make an agreement in their own names. But a company can do so because it has a legal existence.
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