Theory question 104
Business OrganisationsSection B: answer four questions only from this section.
Explain the advantages and disadvantages of a joint stock company as a form of business organization.
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Advantages: limited liability of shareholders
Large capital from sale of shares, stocks and debentures
Continuity of existence (separate legal entity, can sue and be sued)
Shares are easily transferable
Economies of large-scale production
Can employ specialist managers
Disadvantages: costly and lengthy formation procedure
Lack of secrecy: accounts must be published
Separation of ownership from control may lead to inefficiency or fraud by managers
Slow decision making; less personal contact with customers and workers
Double taxation of profits (company tax and tax on dividends)
Possible diseconomies of scale
Explain at least four advantages and four disadvantages.