Advantages of Joint Stock Company
The important advantages of a joint stock company are as follows:
1. Limited Liability: The liability of the members of a company is limited to the extent of the share contributed by them in the company. If a company faces a loss, the shareholders of the company do not have to sell off their personal property for repayment. This advantage of a joint stock company attracts people to invest money in the Company Form of Business.
2. Transfer of Interest: As the shares of a company are transferrable and can be easily bought and sold in the market, it brings liquidity of investment in the company. The shareholders can anytime convert their share investment into cash and can use that amount to buy the shares of another company.
3. Perpetual Existence: As the company form of business has a separate legal existence from its members, it enjoys perpetual succession. It means that a company can be formed by law and can end by law through the process of winding up only, i.e., the death, insolvency, and incapacity of the members do not have any effect on the company’s existence.
4. Growth and Expansion: A company has more scope for expansion and growth because it has large financial resources and high profit rates. It means that if a company has retained profits, it can easily use that amount for its growth and expansion.
5. Efficient Management: Every business requires specialised people and experts for better performance and results. As a company has huge funds at its disposal, it can easily hire experts to perform various business activities, and can efficiently improve its working and performance.
6. Large Amount of Capital: As a company can issue shares to the general public, it grabs the biggest advantage of large capital. Besides, the value of a share is very low; therefore, people with less or small savings can also buy shares of a company. Also, a company can raise funds by issue of debentures, raising loans from financial institutions, and other securities.
Advantages and Disadvantages of a Joint Stock Company
An association of different individuals formed to carry out business activities is known as a joint stock company. This form of organization has an independent legal status from its members. Basically, a joint stock company is an artificial individual with a separate legal entity, common seal and perpetual succession. The Joint Stock Company form of organization is governed by the Companies Act, 2013. The shareholders of the company are its owners; however, the Board of Directors is elected by the shareholders and is the chief managing body of the company. Usually, the shareholders or the owners of the company have indirect control over its operations.