What is a company?
A company is a collective of individuals who are engaged in commercial activities under the same registered name. As a common term in casual conversation, the word “Company” cannot be restricted to technical or legal usage.
ADVANTAGES OF COMPANY
An establish can establish a company to gain advantages over other business models such as sole traders or partnership firms. Here are some of the benefits of starting a company:
Large amount of resources and economies of scale in production
Sole trading concerns and Partnership firms are often in dire need of funds. The company allows unlimited shareholder investment (in a public company). Increasing the number of shareholders can solve the need for larger funds. Joint Stock Companies are the best choice for large-scale businesses. A company can enjoy economies of scale through a higher production capacity, which allows it to reduce production costs. The large margin between production costs and selling prices of products means that companies make higher profits.
Restriction on Liability
The Company’s shareholders are generally not liable. Companies can also be held liable without limitation. Companies with unlimited liability are more likely to be able to raise funds than sole trading companies or partnerships that have unlimited liability. Because the liability of such persons is limited to the amount invested, it is easier for them to raise funds.
The management of companies is separate from the ownership. The Board of Directors, which is democratically elected, manages them. These qualified individuals have solid knowledge and experience in managing the company, as well as the industry in which it operates.
The existence of the company is not affected in the same way as other business forms where the death or succession of an owner can have different consequences. While there may be many employees in the company, the company has its own legal existence that will continue until the end.