Business Compromise
A private company combines the following advantages of partnership and public company
- Large capital: A private company can raise larger financial resources than a partnership.
- Limited Liability: Like a public compan7y, the liability of members in private company is limited to the face value of shares held by them. Unlike a partnership, the risk of members is limited.
- Continuity: A partnership is dissolved on the death, insolvency and lunacy of But a private company like a public company continues to exist irrespective of these events.
- Freedom from Legal Formalities: A private company is free from several legal formalities applicable to a public company. As in the case of partnership, three is flexibility of operations in a privet company.
- Close Supervision and Control: The membership and control of a private company rests with a small group of relatives and friends. Like a partnership, it enjoys benefits of prompt decisions, secrecy and effective control.
Thus, a private company is a mixture of partnership and public company. It enjoys ease of formation, flexibility of operations and personal control which are available in a partnership. At the same time, the main benefits of a public company such as limited liability and stability are available to Privet Company.
Private company enables a small group of persons to control the management without undertaking the risk of unlimited liability. Therefore, it is an ideal form of organization for people who seek personal control of business with the benefit of limited liability. On the others hand, a public company is an ideal form of organization for large scale enterprises like steel, automobiles, computes, etc. because huge capital can be secured form the general public.