Company - Definitions, Advantages, and Disadvantages¶
Definitions¶
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Lord Justice James: A company is "an association of many persons who contribute money or money’s worth to a common stock and employ it in some trade or business and who share the profit and loss arising therefrom."
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Haney's Definition: Defines a Joint Stock Company as "a voluntary association of individuals for profit, having a capital divided into transferable shares. The ownership of which is the condition of membership."
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Legal Definition: A legal entity created by a group of individuals to engage in and operate a business for the purpose of generating profits, formed through legal procedures like incorporation or registration.
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Economic Definition: A production unit that combines resources to produce goods and services for sale in a market, aiming to meet market demand efficiently.
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Financial Definition: An entity that raises capital from investors and lenders to finance its operations and investments, using a capital structure that includes shares and loans.
Advantages and Disadvantages of Companies¶
| Advantages | Disadvantages |
|---|---|
| 1. Large-scale Operation Companies can achieve economies of scale, enhancing market competitiveness. |
1. Lack of Secrecy Public disclosure requirements limit business confidentiality. |
| 2. Ease of Raising Capital Ability to attract investments through share issuance. |
2. Restrictions Subject to numerous regulations, affecting decision-making flexibility. |
| 3. Large Financial Resources Access to significant financial resources for operations and growth. |
3. Management Mischief’s Potential for managerial misconduct against shareholder interests. |
| 4. Limited Liability Shareholders' personal assets are protected from business debts. |
4. Lack of Personal Interest Shareholders may have minimal involvement in business affairs. |
| 5. Perpetual Existence Continuity ensured, unaffected by ownership changes or shareholder death. |
5. Double Taxation Profits taxed at corporate and individual levels. |
| 6. Professional Management Expertise in various fields through hired managers for efficient operation. |
6. High Rate of Taxation Corporate profits taxed at higher rates than individual income. |
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