Answer:

Everything you need to know about the advantages and disadvantages of joint stock company.

Explanation:

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.Some of the advantages or merits of joint stock company are:-

1. Larger Capital 2. Limited Liability 3. Stability of Existence 4. Economies of Scale 5. Scope for Expansion 6. Public Confidence 7. Nontransferable of Shares 8. Professional Management

9. Tax Benefits 10. Risk Diffused 11. SOCIAL Benefits 12. Greater Borrowing Capacity 13. Promotes SAVINGS and Investment 14. Greater Accountability 15. Greater Adaptability 16. Synergy of Capital and Capability 17. Use of Latest Technology.

Disadvantages of Joint Stock Company:

1. Difficulty in formation- The legal formalities and procedures required in the formation of a company are many. It has to approach large number of people for its capital and it cannot commence business, unless it has obtained a certificate of incorporation and a certificate to commence business.

2. Lack of Secrecy- Every issue is discussed in the meeting of the board of directors. The minutes of meeting and accounts of the firm’s profit and loss etc., have to be published. In this situation maintenance of secrecy is difficult.

3. Delay in Decision Making- In company form of organisation, all important decisions are taken by the board of directors and shareholders in general meeting. Hence, decision making process is time consuming. Board of directors itself has often to be at the mercy of bureaucracy.

4. Concentration of Economic Power- The company form of organisation gives scope for concentration of economic power in a few hands. It gives easy scope for the formation of combinations which results in monopoly. Large joint stock companies tend to form themselves into combinations or associations exercising monopolistic power which may prove detrimental to other firms in the same line or to the consumers.

5. Lack of Personal Interest- In company form of organisation, the day-to-day management is vested with the salaried persons or executives who do not have any personal interest in the company. This may lead to reduced employee motivation and result in inefficiency.

6. More Government Restrictions- The internal working of the company is subject to statutory restrictions regarding meeting, voting, audit, etc. The establishment and running of a company, therefore, would prove to be troublesome and burdensome because of complicated legal regulations.

7. Incapable and Unscrupulous Management- Unscrupulous individuals may bring economic ruin to the community by promoting bogus companies. The fraudulent promoters may be fool the public to collect capital and misuse it for their personal gain. Misuse of property, goods and money by the managerial personnel may harm the interests of the shareholders and create panic among the investing public.

8. Undue Speculation in the Shares of the Company- Illegitimate speculation in the values of shares of a company listed on the stock exchange is injurious to the interest of shareholders. Violent fluctuations in the values of shares as a result of gambling on the stock exchange, weakens the confidence of investors and may lead to financial crisis.