Theory question 108
Business OrganisationsSection B: answer three questions only from this section.
Explain any five reasons why a joint stock company is preferable to a one-man business.
Show the model answer
Model answer
It can raise much larger capital by selling shares to many people and borrowing more easily
Limited liability: shareholders lose only what they invested, unlike the sole trader's unlimited liability
Continuity: it continues despite the death or withdrawal of a shareholder
Separate legal entity: it can sue and be sued in its own name
It enjoys economies of large-scale production
It can employ specialists and experts to manage it
Risk is spread among many shareholders
Shares are transferable, so owners can leave easily
Explanation
Five clear comparisons with the sole proprietorship.