The following are the disadvantages of company form of organization
Number of legal formalities must be observed in the formation of the company. To observe these legal formalities, promoters have to spend much time and money.
The directors manage the company with the help of paid officers. If the directors are dishonest, they may make personal gain at the expense of the company. They may misuse their power and position.
A few rich persons may secure control over the affairs of the company. Thus, the management of a joint stock company might become oligarchic in character. (Oligarchy means a small group of people havimg control)
A few individuals may corner the shares to gain control over the company.
The officers of the company do not have incentive to work hard. They are not usually inclined to take risks. They lack initiative.
In sole trading business personal supervision is possible. But in company form of organization there is lack of personal contact between owners and workers. As a result, there is scope for more industrial disputes in a company form of organization.
Joint stock companies have to pay tax at higher rates compared to other forms of organizations.