Joint Stock Companies: Advantages, Limitations and Suitability

Doorsteptutor material for CBSE is prepared by world's top subject experts: fully solved questions with step-by-step explanation- practice your way to success.

Download PDF of This Page (Size: 102K)

Advantages of Joint Stock Companies

There are many advantages which the company form of business organization enjoys over other form of business organizations some of them are as follows:

Advantages of joint stock companies

Advantages of Joint Stock Companies

Limited Liability

Shareholders of a company are liable only to the extent of the face value of shares held by them.

Large Financial Resources

The capital of a company is divided into shares of small denominations so that it creates benefit to the people with small means.

Continuity

A company enjoys uninterrupted business life. As a body corporate have perpetual succession, it will continue to exist even if all of its members die or desert it.

Transferability of Shares

In public company there are easily available right of transfer of share without the consent of another member.

Diffused Risk

Public companies have large number of members that’s why the risk of loss in a company is spread over a large number of members. Single person not carry whole the burden of losses.

Social Benefits

The company organization helps to mobilize savings of the community and invest them in industry.

Limitations of Joint Stock Companies

Difficulty of Formation

There are number of documents have to be prepared and filed with the Registrar of companies that create more difficulty and expense.

Excessive Government Control

It is mandatory to follow all the rules and regulations of governments. A company is subject to elaborate statutory regulations in its routine operations, Periodical reports, audit and Publications of accounts is obligatory.

Oligarchic Management

The management of a company is supposed to be democratic but in practice company becomes an Oligarchy (rule by few).

Delay in Decision

Sometime there are unnecessary debate take much time that Create problems in taking decisions. A lot of time is wasted in calling and holding meetings and in passing resolutions.

Lack of Secrecy

As per the Companies Act, 1956 a company is required to disclose to the public a variety of information on its working. This results in lack of secrecy.

Suitability of Joint Stock Company

The company form of organization is suitable for large business concerns. It has made it possible to accumulate large amounts of capital required for large scale operations. Machine manufacturing, information technology, iron and steel, aluminum, fertilizers, and pharmaceutical etc., are generally organized in the form of Joint Stock Company.

Developed by: