Why It Is Preferred To Form Limited Companies Rather Than Sole Proprieters Or Partnerships?List The Advantages Of Companies.


2 Answers

Muhammad Suleman Profile
There are several advantages which can be claimed for this from of organization:
(1)The company business is generally a large-scale business. Therefore, it enjoys all the economies of large-scale production, internal and external, e.g., economies arising from the use of specialized labor and machinery, economy of space, of buying and selling, publicity, research or experiments, etc.

(2)Besides these, there are several advantages peculiar to the organization itself. Shares are of small denomination, and they suit all pockets and temperaments ranging from the cautious to the speculative. Hence, large capital can be raised.
(3)The fact that liability is limited and shares are transferable induces many people to subscribe to the share capital.

(4)The limitation of liability enables new risks to be taken and many new fields of business to be opened out. The actual loss, if any, is widely distributed.
(5)From the point of view of the individual investor, too, it has great advantages. Not only is his liability limited, but he also enabled to spread out his investments.
(6)Unlike the partnership, the company is a legal person part from the shareholders or directors. It can sue and be sued upon. It thus enjoys a perpetual existence. Further, it is on account of its ever-lasting existence.
Gordon Edgar Profile
Gordon Edgar answered
The single most relevant reason is the issue of limited liability, i.e. when things go wrong, the sole trader could lose everything- unlimited liability- whereas the limited liability afforded by a company formation protects the individuals concerned, limiting liability to the assets of the company formed by them.

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