Tashkent financial institute department of finance from "finance"

Advantages of Corporate Enterprises⁸

In modem days, the company form of organization is acquiring more and more importance. This is due to the various advantages that are not available in other forms of organizations like sole tradership and partnership. The principal merits of a corporate enterprise can be summarized as follows:

• 
  The liability of the members in a corporate enterprise is limited to the face value of the shares held by them. The limited liability of a company is a distinct feature of company business. Therefore, the shareholders cannot be called upon to pay off the debts of the company out of their private funds. The position is altogether different in case of a sole tradership and a partnership;
  
• 
  The maximum number of members is 50 in case of private limited companies⁹. and it is indefinite in case of public companies. The capital is also divided into a number of small parts known as shares. Therefore, even people with limited resources can afford to subscribe for the shares of the company. This results in mobilization of funds easily and economically. This aspect also facilitates large scale operations and its consequent benefits are enjoyed by the shareholders. Almost all the large scale enterprises of the present day are established only in the corporate form;
  
• 
  Corporate enterprises have the capacity to expand its business in future. This is due to all the benefits of large scale operations are available to the companies. Separation of ownership and control enables the company to hire experienced personnel to run the business. The company enjoys legal immortality i.e. It has a long life. Its life is not affected by the death, insanity and insolvency of all its members. The company continues to be in existence irrespective of
  the changes in its membership. This feature enables the company to carry on its business without any disturbance;
  

• 
  The shares of a company can be transferred from one person to another in the manner provided in the Articles of Association. The consent of other members is unnecessary for a transfer. This characteristic enables the investor to realize his money at any moment by selling the shares in the open market. At the same time, the money is not withdrawn from the company. Hence, it has assured financial stability;
  
• 
  The shareholders are the real owners of the company. They are more in number and are scattered over a wide area. Hence, it is not practicable for all the shareholders to manage the affairs of the company. Therefore, the shareholders elect a few persons amongst them as directors to manage the affairs of the company. All the affairs of the company management (Election of directors, appointment of auditors, approval of accounts, declaration of dividend etc.) are, however, carried on under the control of the shareholders on democratic principles¹⁰;
  
• 
  Company form of organization is the only suitable devise to stimulate large scale operations with substantial resources. Even people with limited resources can afford to invest their savings in the corporate securities since their face value in general is small. This facilitates mobilization of resources and easy capital formation in the country.
  

The corporate form of enterprise is not an unmixed blessing. It is also subject to certain limitations. Yet the limitations are very few. They can be summed up as follows:

Table 2

Long Drawn Process	Erosion of Limited Liability
Expensive	Administrative Delays
Rigid Government Control	Separation of Ownership from Control