Question

Doug Datner had an eclectic background. He completed his law degree from the University of Virginia, then went to work for a technology start-up in Dubai. After the start-up was purchased by a larger corporation, affording Doug a hefty sum of money, Doug and his spouse returned to the United States. While working with an architect and a designer to build their dream home, they realized that there was not a provider of high-quality custom-made door and window hardware at a reasonable price point in the United States. Even though Doug had no experience in the field, he decided to start a business manufacturing high-quality custom-made door and window hardware. He named the company Hardware House Doug and his wife cleared space in their newly constructed garage, designed several basic prototypes, and hired a metalwork expert to replicate their prototypes. They decided to have a few designs in catalog as one component of their business, but have the capability to alter those designs to provide designers with custom hardware. The first few years were tough. Business was steady enough to hire a second metalwork expert, but cash flow challenges often made Doug worry whether he would be able to pay his metalwork experts on time. Still, the Hardware House had gained a number of consistent clients, and was able to move into an old warehouse space and expand operations. Ten years later, Hardware House has nearly 100 employees. While the majority of the employees work in manufacturing, there are also employees in marketing, design, accounting, and human resources. Doug structured the business to limit his liability in case of lawsuit, but still managed to maintain the business without sharing ownership.
Which of the following is an advantage Doug should expect by sharing ownership with others?
a. Gaining access to all of the distribution of profits.
b. Access to additional knowledge and expertise.
c. Additional freedom from government regulation.
d. Enhanced control to make decisions immediately
e. Greater degree of secrecy

Answer 1

Answer: b. Access to additional knowledge and expertise.

Explanation:

One of the advantages of opening a limited company be it private or public, is the additional knowledge that the other shareholders would bring on board.

In the case of a private company, the new shareholders would be from various backgrounds and would have knowledge on how to grow the business and in the case of a public company, the Board of Directors are usually drawn from various industries and so will put their experience from those industries into the company thereby giving it an edge.