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Joint Stock Company Advantages And Disadvantages Pdf

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A Joint Stock Company may be defined as a company that issues stock and allows derived promotion trading making the stockholders legally responsible for the debts caused to the company.

Joint-stock company

There are some salient features that distinguished a company from other forms of business enterprises. The minimum number required for usually starts from 5 or 7, but it varies from country to country.

A company is created with the sanction of law and is not itself a human being; it is, therefore, called artificially; and since it is clothed with certain rights and obligations, it is called a person. A company is, accordingly, an artificial person. Unlike a partnership , the company is distinct from the persons who constitute it. Section 34 2 says that on registration, the association of persons becomes a body corporate by the name contained in the memorandum. Hence, in the case of a company limited by shares, the liability of members is limited to the nominal value of shares held by them.

Thus, if the shares are fully paid up, their liability will be nil. However, companies may be formed with unlimited liability of members, or members may guarantee a particular amount. The Supreme Court held that a shareholder is not the part-owner of the company or its property; he is only given certain rights by law, e. However, in a private company, certain restrictions are placed on such transfer of shares, but the right to transfer is not taken away absolutely.

A company being an artificial person cannot be incapacitated by illness, and it does not have an allotted span of life. The death, insolvency, or retirement of its members leaves the company unaffected.

Members may come and go, but the company can go forever. A company is an artificial person is not bestowed with a body of natural being. Therefore, it has to work through its directors, officers, and other employees. But, it can be held bound by only those documents which bear its signatures. The common seal is the official signature of a company. Another fall-out of separate legal entity is that the company if aggrieved by some wrong done to it, may sue or be sued in its name.

This is because there are many advantages which the company form of business organization enjoys over other forms of business organization. A joint-stock company can collect a large amount of capital through small contributions from a large number of people.

In public limited companies, shares can be offered to the general public to raise capital. They can also accept deposits from the public and issue debentures to raise funds. In the case of a company, the liability of its members is limited to the extent of the value of shares held by them.

The private property of members cannot be attached to the debts of the company. This advantage attracts many people to invest their savings in the company, and it encourages the owners to take more risks. Management of a company is vested in the hands of directors, who are elected democratically by the members or shareholders.

These directors, as a group known as Board of Directors or simply Board , manage the affairs of the company and are accountable to all the members. So members elect capable persons having to sound financial, legal, and business knowledge to the board so that they can manage the company efficiently.

Due to the availability of large financial resources and technical expertise, companies can have large-scale production. It enables the company to produce more efficiently and at a lower cost. A joint-stock company offers employment to a large number of people.

It facilitates the promotion of various ancillary industries, trade, and auxiliaries to trade. Only in company form of business, it is possible to invest a lot of money on research and development for improved processes of production, new design, better quality products, etc.

Although a Sole Proprietor enjoys more advantages than any other form of business , entrepreneurs are found eager enough to expand their venture up to Joint-Stock Company motivated by the above advantages. Despite many advantages of the company form of business organization, it also suffers from some limitations.

The formation or registration of a joint-stock company involves a complicated procedure. Several legal documents and formalities have to be completed before a company can start its business.

It requires the services of specialists such as Chartered Accountants, Company Secretaries, etc. Therefore, the cost of formation of a company is very high. Joint-stock companies are regulated by the government through the Companies Act and other economic legislations.

Particularly, public limited companies are required to adhere to various legal formalities as provided in the Companies Act and other legislation.

Non-compliance with these invites heavy penalties. This affects the smooth functioning of office companies. Generally, policy decisions are taken at the Board meetings of the company. Further, the company has to fulfill certain procedural formalities.

This gives a lot of economic and other power to the persons who manage the company. Any misuse of such power creates unhealthy conditions in the society, e. A joint-stock company form of business organization is found to be suitable where the volume of business is large and huge financial resources are needed.

Since members of a company have limited liability, it is possible to raise capital from the public without much difficulty. Again, for business activities that require public support and confidence, a joint-stock form is preferred as it has a separate legal status. Certain types of businesses, like the production of pharmaceuticals, machine manufacturing, information technology, iron and steel, aluminum, fertilizers, cement, etc.

A company may be an association of persons, associate together to carry on a lawful business with a view of profit. Read our article on types of companies to understand how companies are classified.

The vast majority of companies are with limited liability by shares. The persons who contribute it, or to whom it belongs, are members.

What is a Company? Definition, Characteristics, Advantages, Disadvantages

Everything you need to know about the advantages and disadvantages of joint stock company. A Joint Stock Company is an incorporated association of two or more persons having a separate legal existence with perpetual existence and common seal. Its capital is divided into shares which are freely transferable and the owners of these shares have limited liability. It is an artificial entity created by law. A Joint Stock Company is capable of procuring unlimited capital by issuing share and debentures which can be bought both by the classes and the masses. Due to qualities such as limited liability and stability of the enterprise, the Joint Stock Company attracts investors and good managerial talent towards the company. Thus, a Joint Stock Company is in a better position to meet the growing needs of modern business.

After reading this article you will learn about the advantages and disadvantages of joint stock company. Advantages of a Joint Stock Company: The advantages of forming a company rather than carrying on partnership business are as follows: 1. Large Capital: The outstanding advantage is that it allows vast mobilization of capital which otherwise is not possible to arrange. In a public company. The main advantages of Joint Stock Company are - i Large financial resources: A joint stock company is able to collect a large amount of capital through small contributions from a large number of people.

Joint Stock Company – Advantages and Disadvantages. Advantages: ADVERTISEMENTS: (i) Limited Liability – The liability of the shareholders is only up to.

Joint Stock Company

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Advantages and Disadvantages of Joint Stock Company

Vast Scope of Expansion. Permanent Existence. Transferability of Shares.

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Advantages and Disadvantages of Company form of Organisation


Liaburrebu1970 02.05.2021 at 11:19

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Katja W. 03.05.2021 at 20:20

The company form of organisation has been successful in almost all countries of the world.

April K. 03.05.2021 at 22:41

What are the advantages and disadvantages of joint stock companies?

Angie M. 05.05.2021 at 04:19

A joint-stock company is a business entity in which shares of the company's stock can be bought and sold by shareholders.