The social profit generated by enterprise activities is the addition of economic profit or the external economic effect of the activity. Companies may make significant monetary profits, but external economic effects often result in negative results, and substantial social profits may be minimal. Such as the industrial revolution, the mass production of the factory is low cost and price of product, but in order to earn maximum profit, factory owners and lower production costs, lead to the low wages of child labor, as well as improper handling industrial waste or contaminants and other social burden.
When a company has been making losses for assorted years, the financial position does not present a real and fair view of the condition of the affairs with the company. In such a company the assets are overvalued, the assets side in the balance sheet contains fictitious assets, useless intangible assets and debit balance within the profit and loss account. Such a situation does not depict a genuine picture of economic statements and shows a higher net worth than what the real net worth ought to be. In short the company ends capitalized. Such a situation brings the requirement for reconstruction. Reconstruction is really a process by which affairs of a company are reorganized by revaluation of assets, reassessment of liabilities through writing from the losses already suffered by reducing the paid up valuation on shares and/or varying the rights attached with different classes of shares. The object of reconstruction may be to reorganize capital or to compound with creditors or effect economies. Such a process is named internal reconstruction which can be accomplished without liquidating the company and forming a fresh one.
A limited liability company has got the same legal protection as that of a corporation. However, precisely what is most appealing relating to this kind of customers are that its owner is distinctly protected from business liabilities. For instance, whenever a law suit is filed up against the LLC and the company loses within this suit, the owner's personal assets are not at all affected. A surety or guarantor relationship, or even expressly inked with the parties, just isn't recognized under this type of company. Hence, the owner's assets should never be in danger when the company suddenly becomes bankrupt or incurs debts.