In this article, you’re going to know about What is joint stock company, Advantages of joint stock company and Disadvantages of joint stock company.
What is joint stock company?
A joint stock company (JSC) is a form of a joint venture in which two or more individuals involved in the business of stock. The certificate of ownership (shares) issued by the corporation in exchange for each financial contribution. And shareholders are free to transfer their shares of interest at any time by selling their shares to others.
At present, company law is the existence of a joint stock company often with incorporation and limited liability. This means that shareholders are only responsible for the company’s debts, which are worth the money invests in the company. Aso as a result, the joint stock company commonly known as corporations or limited companies.
Some jurisdictions still provide the opportunity to register joint stock companies without limited liability. In the United Kingdom and other countries, who have adopted their own form of corporate law, they are known as unlimited companies. In the United States, they are somewhat confusingly known as joint stock companies.
A joint stock company is a trading organization. It owns by the general public who buys it. Also, The holder of the company known as the shareholder. The company runs and manages by the board of directors selected by shareholders. The following are some of the advantages of joint stock company and the disadvantages of the joint stock company.
Advantages of joint stock company
In the company, ownership separated from its management. Owners or shareholders can not participate in company management. Management of the company done by the board of directors elected by the shareholders. The director appoints experienced and qualified personnel for skilled management. Also, Efficient management can help the company make rational decisions and can give better results for the company.
The outstanding benefit is that it allows a large gathering of capital which otherwise is not possible to arrange. In a public company, there is no limit to the number of members. A large number of people take interest in the company by buying shares.
The fact that the shares are transferable, the company has given additional benefits to attract more people. No other form of business organization has adopted so well in raising large quantities of capital as a joint stock company.
Larger range of expansion:
The huge capital collected through shares coupled with the company’s earnings contributes a lot of scope for its expansion. So, The company provides an excellent field of self-productive development. Also, The managerial talent supported by huge finance leads to big earnings and the final expansion of business and development.
The joint stock company system is responsible for the rapid development of industries and trade in many countries. Since, Joint Stock Companies have large financial resources they are able to produce large scale, satisfy a large number of consumers, generate large scale employment opportunities, promote balanced regional growth and tax Through the government’s contribution to the government.
The liability of the members of the company has limited. Members can not be invited to pay more than the nominal value of shares held by them. Also, It encourages those who have little savings to invest money in the company, thus providing adequate capital for early outlays and expansion of the business.
Disadvantages of joint stock company
Lack of personal interest:
Company shareholders do not participate in the management of the business. The company is managed by its employees, who only take interest to the extent of their assigned work to justify their salary. Also, They do not take personal interest in the company’s growth and development in case of sole ownership and partnership.
Difficulty in formation:
There are lots of legal requirements and formalities require to fulfill. The cost involved is quite heavy. Also, It has to contact a large number of people for its capital. It can not begin its business by the time the certificate of incorporation has not received. This is given after a long time when all the formalities are completed.
Lack of security:
A company can not maintain the confidentiality of its financial status. Financial yearly details are distributed between the shareholders, registrars, bankers and stock exchanges of the country every year. This helps the competitors to know the strong and weak points of concern. So, On the other hand, confidentiality can maintain the sole proprietorship and partnership.
Delay in decision making:
In this form of organization, decisions not made by a single individual. All important decisions taken by the board of directors. The decision-making process is time-consuming. Due to delay in decision making, many opportunities can be expensive. Also, Growth of decisions that are a common feature of the sole business and partnership in a company, is not available.
A company must comply with state regulations and regulations. In this the government has to submit various reports and details. It has to pay the registration fee. He has to pay all the taxes imposed on his form. Non-compliance seems to be a huge penalty.
Thus, Now You all know that What is Joint Stock Company, advantages of Joint Stock Company and Disadvantages of Joint Stock Company. Read this article also – Economic growth | Top 10 factors of economic growth.