Advantages of Joint Stock Company
When some people voluntarily construct an organization by investing their money for the purpose of earning profit according to the rules and regulations of the respective country is called Joint Stock Company. It is a company whose stock is owned jointly by the shareholders.
There are many advantages which the company form of business organization enjoys over other forms of business organization. The advantages of Joint Stock Company are discussed below:
Adequate capital: It is easy to raise a large amount of share as the number of persons contributing to the capital, except in case of Private Companies, it is easy to raise a huge amount of capital for a Joint Stock Company. In a public limited company, shares can be offered to the general public to raise capital. The company can anytime subscribe its shares and raise its capital. So it enjoys the advantage of adequate capital and the expansion of such business is more usual.
Limited Liability: Liability of members of Joint Stock Company is limited to only the extent of the amount of due fax value of the shares owned by them. This is an attractive advantage which drags people so lowest in such company. Moreover, as there are sore members, the amount of loss is spread on all of them and therefore it would be less for each investor.
Perpetual succession: Company has got perpetual succession by its legal distinctive personality. This perpetual succession allows it to undertake the big projects, as its operations are not affected by the death, insanity, or insolvency of any shareholder of the company. As a result, the continuity of the business is far more secure than that of the other forms of businesses.
Transferability of shares: In a Joint Stock Company, particularly the shares of the public limited company are easily transferable. As a result, if a shareholder wants to sell his/her shares, he/she can sell it anytime (without any obstacle) by properly following the rules and regulation of selling imposed by Security & Exchange Commission (SEC).
Efficient administration: The direction of the operations of the business almost depends upon the board of directors. Since the directors of companies are elected
Field of lucrative investment: Joint Stock Companies are a lucrative place of investment because of its perpetual existence, limited liability, legal regulation, reasonable price of shares etc. Investors become more attracted as there is a chance of raising the share price.
Higher profits: As the company operates on a large scale it enjoys economies in production, distribution, management, and financing. This enables the company to produce more efficiently and at a lower cost, which ultimately increases the rate of profits ensured.
Diffused risk: In Joint Stock Company, the risk of business is spread over a large number of people, especially in public company; the risk of loss is diffused over a large number of persons.
More employment: Joint Stock Company also play a significant role in increasing the employment nut in the country as it provides employment to a large number of people directly and indirectly. This helps to increase higher national income for the country and higher standard of living for the people.
Not only a joint stock company has these advantages mentioned above but also society, government and all the people of the country directly or indirectly get several facilities and special benefits from these advantages. For these reasons, we can say that business people are more enthusiastic to formulate Joint Stock Company.