Question

Explain the causes for the popularity of company form of business organisation.

Answer 1

Causes for the Popularity of the Company Form of Business Organisation:

1. Large Capital: Companies can raise a significant amount of money by issuing shares to a large number of investors.
2. Limited Liability: Shareholder’s liability is limited to the unpaid value of their shares, reducing personal risk.
3. Perpetual Succession: The company continues to exist indefinitely, regardless of member death, retirement, or insolvency.
4. Efficient Management: Professional managers and experts ensure sound decision-making.
5. Transferability of Shares: Shares in publicly traded companies can be readily bought and sold, allowing for liquidity.
6. Economies of Scale: Large-scale operations reduce costs and increase competitiveness.
7. Democratic Management: Management is vested in a Board of Directors elected by shareholders, which ensures accountability.
8. Public Confidence: Companies follow to regulatory laws, report results, and undergo audits, all of which build goodwill and credibility.