The shareholders invest in the company and become its owners, with their ownership proportional to the number of shares they hold.
The shares can be bought and sold on the stock market, allowing investors to trade their ownership in the company without affecting the company’s operations. This makes joint-stock companies a popular way to raise large amounts of capital for investment and expansion.
Features of a joint stock company
- Limited Liability
- Legal Entity
- Transferability of Shares
- Perpetual Existence
- Professional Management
- Shareholders’ Meetings
- Capital Raising
- Regulatory Requirements
Types of joint-stock company
- Registered Company
- Statutory Company
- Chartered Company
Advantages of a joint-stock company
1. Limited Liability: Shareholders are only liable for the amount of money they have invested in the company, and their assets are protected from the company’s debts and liabilities.
2. Easy Transferability of Ownership: Shares in a joint-stock company can be easily bought or sold, allowing investors to enter or exit the company as they see fit.
3. Perpetual Existence: A joint-stock company has perpetual existence, meaning it can continue to operate even if one or more shareholders leave the company or pass away.
4. Access to Capital: Joint-stock companies can raise capital by issuing shares of stock, either publicly or privately.
5. Professional Management: Joint-stock companies are typically managed by a board of directors, which is elected by shareholders.
Disadvantages of a joint stock company
1. Complex setup: Joint-stock companies require a complex setup process, including the drafting of articles of incorporation and bylaws, and compliance with various legal and regulatory requirements.
2. Lack of control: Shareholders in a joint-stock company have limited control over the day-to-day operations of the company.
3. Conflict of interest: Shareholders may have different goals and priorities, which can lead to conflicts of interest.
4. High costs: Joint-stock companies require a significant amount of capital to set up and maintain.
5. Liability exposure: Shareholders in a joint-stock company may be personally liable for the company’s debts and legal liabilities.
Joint-stock company vs public company
A joint-stock company is a type of business entity in which the ownership is divided into shares that can be bought and sold by shareholders. A shareholder’s liability is limited to the amount of their investment. On the other hand, a public company is a type of joint-stock company that has issued shares to the general public and is listed on a stock exchange. This means that its shares can be freely traded by anyone who wants to buy or sell them.
Key point
A joint stock company is a company in which the ownership is divided into shares that can be bought and sold by shareholders. Joint stock is a good way to raise large capital for investments and expansion.
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