Advantages of the company

The company offers a number of advantages not available in other forms of organisation. Among these advantages are the following:

1. Greater amounts of capital can be gathered together. Some overseas companies have one-half million or more shareholders. One Australian company has almost 200 000 shareholders. The issue of shares or stock is a means of obtaining funds from the general public; both small and large investors find stock ownership a convenient means of participating in ownership or business enterprise.

2. Limited liability. Creditors of a company have a claim against the assets of the company only; not against the personal property of the owners of the company. Since a shareholder has no personal liability for the debts of the company, he or she can never lose more than the amount of the investment in fully paid shares. This feature of limited liability is one reason why companies find it easy to gather funds from people in all economic levels.

3. Shares in a public listed company are readily transferable. The ease of disposing of all or part of one's shareholdings in a company makes this form of investment particularly attractive.

4. Continuous existence. A company is a separate legal entity with a perpetual existence. The continuous life of the company, despite changes in ownership of shares is made possible by the issuance of transferable shares.

5. Centralized authority. The power to make all kinds of operating decisions is generally lodged in the managing director of a company. He may delete to others limited authority for various phases of operations, but he retains final authority over the entire business. This clear-cut centralization of authority permits rapid decisive action and avoids the arguments and conflicts that are characteristics of a partnership, which has two or more “active bosses”.

6. Professional management. Owners need not participate in management. The person who owns a few shares in a large company usually has neither the time nor the detailed knowledge of the business necessary for intelligent participation in operating problems. One of the attractive features of share ownership is the opportunity it affords to share in the benefits of ownership without assuming the responsibilities of management. Since the functions of management and of ownership are sharply separated in the corporate form of organisation, the company is free to employ as executives the best managerial talent available.

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