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Starting a Business
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starting a Business Creating a Business Plan
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starting a Business
Starting a Business
Choosing a Form of Business Organisation:
Public Limited Company
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A public limited company is a voluntary association of members which is incorporated and, therefore has a separate legal existence and the liability of whose members is limited. Its main features are :-
  • The company has a separate legal existence apart from its members who compose it.

  • Its formation, working and its winding up, in fact, all its activities are strictly governed by laws, rules and regulations. The Indian Companies Act, 1956 contains the provisions regarding the legal formalities for setting up of a public limited company. Registrars of Companies (ROC) appointed under the Companies Act covering the various States and Union Territories are vested with the primary duty of registering companies floated in the respective states and the Union Territories.

  • A company must have a minimum of seven members but there is no limit as regards the maximum number.

  • The company collects its capital by the sale of its shares and those who buy the shares are called the members. The amount so collected is called the share capital.

  • The shares of a company are freely transferable and that too without the prior consent of other shareholders or without subsequent notice to the company.

  • The liability of a member of a company is limited to the face value of the shares he owns. Once he has paid the whole of the face value, he has no obligation to contribute anything to pay off the creditors of the company.

  • The shareholders of a company do not have the right to participate in the day-to-day management of the business of a company. This ensures separation of ownership from management. The power of decision making in a company is vested in the Board of Directors, and all policy decisions are taken at the Board level by the majority rule. This ensures a unity of direction in management.

  • As a company is an independent legal person, its existence is not affected by the death, retirement or insolvency of any of its shareholders.

Advantages

  • Continuity of existence

  • Larger amount of capital

  • Unity of direction

  • Efficient management

  • Limited liability

Disadvantages

  • Scope for promotional frauds

  • Undemocratic control

  • Scope for directors for personal profit

  • Subjected to strict regulations

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