Joint Stock Company is a large organization to cater the needs of modern business, Modern business requires huge amount of capital, technology and skilled human resources. Proprietorship firm cannot harness such huge amount of resources. Joint Stock Company can only afford required huge resource. Father, these types of business organization has the following advantages:
Advantages of Joint Stock Company
- Legal Status: A company possesses legal status suitable for long term business operation. Shareholder’s problem dose not affects the existence of the company.
- Huge Accumulation of Capita: Joint Stock Company’s Share capital is divided into smaller share value and sold to the public and in this way large amount of capital can be accumulated to cater large scale business requirements.
- Limited Liability: The liability of shareholder is limited by this contributed share value and personal property is relieved from business liability. Consequently company can take rick for linger project.
- Separate Entity: A joint Stock Company has separate legal status. So it can independently work through agents without direct enveloped of the owners.
- Perpetual Succession: A joint Stock Company has punctual existence. Though on certain occasions It is liquated or dissolved or liquated or dissolved, normal changes in the ownership do not cause any threat to the existents of the company.
- Transferability of Ownership: The Ownership of a company is represented by share the shares of a public limited company are freely transferable. The transferability provides liquidly of investment to the shareholders and individual’s problem dose not affects the company.
- Efficient Management: A Company can ensure efficient management. It can afford skilled management managerial in its operation and thus ensure efficient management.
- Public’s Confidence: Public can put confidence on the company as it is backed by the law of the country. Consequently, Company can collect capital from the public and invest in loge term perspective and vision.
- Provision of Investment Opportunity: A company is a viable investment opportunity for general public. Individuals having capital, but unable t o does business may provide capital in the form of share and return on the investment.
- Provision of prosperity: A successes company is financial elite in a country. A company utilizes natural resources and provides income and employment.
Thus modern corporate types of business organization are very useful members of the economic system of any country in the national and international context.
Disadvantages of Joint Stock Company
The Ownership management is separate in a company. The management is not the owner of a company. So he may not feel sufficient Encouragement about the efficient running of the company. A joint Stock Company also suffers from a number of other disadvantages, which are as follows:
- Inefficient Administration: A company may suffer from inefficient administration. As ownership is separate from management in a corporate types of firm, management may follow goals like satisfying, not maximizing and administration may develop.
- Watering of Capital: As a company accumulates huge amount of capital, so proper utilization of capital may not be done and adequate rectum may not be earned. Capital may be redundant in a company.
- Monopoly may develop: Successes Company is a resourceful organization. Consequently, it may develop as a monopoly company.
- Complex Legal Bindings: A company is a legal entity and complex bindings are compulsory upon a company.
- Lack of swift Decision: The decision making process of a company is complex and time consuming, and consequently, swift decision making is almost impossible.
- Conflict of Majority and Minority: The management of a company, especially, public limited company, is in the hands of electors. In the denotation process, majority gets the control, by arranging majority a group may dominate over the minority and detriments conflict may arise and may stand in the way of success of the company.
- Compulsory Liquidation: A public limited company is a company an organization of public interest. Any aggrieved shareholder or creditor may go to the court to save his interest and curt will take an step for compulsory liquidation of the company. Thus the company will come to liquidation.
Thus, a company also suffers from some disadvantages.