Company Law liability Essay Example | Topics and Well Written Essays - 3750 words

Company Law liability - Essay ExampleHe manages the credit line individually. By passage of time the business expands and the business activities will expand. When such business expansion takes throw in it will be execute difficult for the Sole Trader to manage with the business. At this time the sole bargainer needs some more people to help him and share both investment and also returns of his business. This necessitates the transformation of Sole Trade to Partnership form of business where two or more people come together and enter into a deed of federation agreeing to carry on the business crossroadstly by investing. They share both the profits and loss of the partnership according their share of investment or as mutually agreed by them. The partnership level need not be a passage of sole trader. It can be formed directly by two or more persons join together with a common objective and mutual agreement. In the partnership firm the liability of the partners is un express, t heir ad hominem property is also liable for discharge of firms debts. The further expansion of partnership firm inviting more superior to cop up the expansion of the business necessitates formation of a limit alliance. In a limited company funds are pooled from the public in the form of shares. The amount so pooled is known as share capital. Again this limited company need not be a conversion of partnership firm. It can be directly formed.As it is seen that... 1.Limited liability In a worldly concern limited company the liability of the share holders is limited to the extent of share capital of the individual share holders, where as in a partnership firm the liability of the partners is extended to their personal property. Eg If a shareholder keeping one share whose face value is 10. His liability is limited to 10. 1.Decision Making In a company major business policy decisions are taken in the meeting of the board of directors in a democratic way. This will give good productiv e and efficient decisions which leads to business prosperity. When compared to the partnership firm where the partners take the decisions either individually or jointly. 2.Borrowing powers A limited company will overhear more borrowing powers than the partnership firm. The company can borrow the funds from shareholders, financial institutions and any other sources as per the decisions taken in the boards meeting.3.Investment The shareholders come forward easily to invest in a public limited company in the form of shares or debentures since the liability is limited. 4.Perpetual founding Public Limited Company is having a unique make of perpetual existence. Though the shareholders join and leave the company remains existence. The shareholders either leaving or causing death do not effect the existence of the company. This is called as perpetual existence.5.Transferability of shares Another unique advantage of Public Limited Company is the free transferability of shares. This featu re attracts the Public in investing in the company. With this feature the shareholders can transfer their shares freely as and when they wish. Disadvantages either business setup has its own disadvantages too. The Public Limited