Advantages Of Joint Stock Company

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Advantages of Joint Stock Company

Joint stock company has gained popularity throughout the world as a form of business organization because it is superior to a sole tradership concern and a partnership firm in the following respects:

1.    Vast Financial Resources. A company can raise huge financial resources. It can issue different types of securities (i.e., equity shares, preference shares, and debentures) to attract different types of investors. A company can also raise finance from the public in the form of public deposits and banks and other financial institutions.

2.    Continued Existence. A joint stock company is a separate legal entity distinct forms those who are its members or who promoted it. As an incorporated body, it enjoys perpetual existence. It continues functioning so long it has the minimum number of members required by law. Thus, it is a stable form of organization and is best suited for a business which requires a long period to establish and consolidate.

3.    Limited liability. The liability of the shareholders of a joint stock company is limited to the face value of the shares held by them. Their private properties are not attachable to recover the debts of the company. Thus, this form of organization is a great attraction to person who do not want to take much risk.

4.    Scattered Risk. Shares of a company can be held by a large number of people. Thus, the risk of loss spread over a large number of persons and the possibility of hardship on a few persons as in case of partnership or on one person as in case of sole tradership is avoided in case of failure of the shares and debentures business.

5.    Transferability of Shares. The shareholders of public companies are entitled to transfer the shares held by them to others. The shares of most companies are listed on the sock exchange and hence can be readily sold. This ensures liquidity of investments and encourages investment of funds in the companies.

6.    Economies. A company is in a position to raise huge capital and an undertake large scale operations. The increase in the side of the business operations would result in the economies in production, purchase, selling, management, etc. Thus, cost of production will be less and higher efficiency will be achieved as compared to other forms of business organizations.

7.    Expert Management. Since a company carries business on large-scale and has huge financial resources, it can afford the services of expert personnel. This will lead towards professionalisation of management which is necessary for the efficient management of any business.

8.    Scope for Growth. The company form of organization facilitates expansion of business operations because of a sound financial base. Moreover, it employs professional managers who take risks in launching diversification programmers involving huge amount of capital.

9.    Public Confidence. The formation and running of a company is regulated by the provisions of Companies Act and various other acts. The provisions regarding appointment and remuneration of directors, compulsory audit and publication of accounts, protection of minority shareholders and so on have crated greater public confidence in joint stock companies.

10.    Social Advantages. A joint stock company is also beneficial from the society’s point of view. It mobilizes the scattered savings of public and invests them in sound industrial and commercial ventures. Because of large-scale operations, it provides employment to a large number of people. Economies of large-scale operations also lead to economical use of national resources and provision of goods and services to the public at cheaper price.

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