Advantages and Disadvantages of Joint Stock Company

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Read this article to learn about the points of advantages and disadvantages of joint stock company or companies in brief:

Advantages include: (i) Limited liability, (ii) Continuity of transactions, (iii) Benefits of large scale operations, (iv) Professional management, (v) Social benefits, (vi) Research & Development, (vii) Transfer of shares, (viii) Stability.

Disadvantages include: (i) Formation is not easy, (ii) Control by a group, (iii) Manipulation & Speculation, (iv) Delay in policy decisions, (v) Lack of secrecy, (vi) Lack of personal interest

Advantages of Joint Stock Company-

The advantages of joint stock companies are also known as the merits of joint stock companies. It includes various points such as:-

Advantages of Joint Stock Company
Advantages of Joint Stock Company

1. Limited Liability:

In the part of the joint stock company, the liability of members is limited in nature. This feature helps to attract a large number of small investors to invest in the company. It also helps the company to raise a huge amount of capital.

Because of limited liability, an organization is also able to take bulk amount of risks.

2. Continuity of transactions:

A company is a type of artificial person creates by law and other legal approaches. It is not affected by the insolvency, death, and so on. It follows the procedure of perpetual succession i.e., anybody can come or anybody can go, but the company runs forever and ever.

3. Benefits of large scale operations:

It is a type of company form of organization which helps to provide the capital for large scale business operations. Its main motive is to increase the efficiency or volume of production with the expense of minimum cost. It further opens the scope of future innovation or development.

4. Professional Management:

Every company has a large volume of business capital, business activities, other kinds of stuff and a company needs professional managers to manage all these things or activities. And because of their financial strength and power, they can easily afford to appoint such kind of managers.

5. Social benefits:

A joint stock company offers various types of benefits to our societies like employment generation facilities, etc. It facilitates the promotion of various trades, ancillary industries, auxiliary to trade. Sometimes it also donates money for health, education, community service, and social institutions.

They work like a charitable trust also because it is the part of social objectives.

6. Research and Development:

A large organization or company always invest a huge amount of money in research and development for improved processes of production, designing, improving the quality of products, designing, and training facilities.

7. Transfer of shares:

In this merit, the shares are easily transferred from one party to another party. A shareholder can easily convert the value of our shares in terms of cash by selling his shares at any time in the stock exchanges.

8. Stability:

Sole proprietorship firms and partnership firms working life are much less compared to a joint stock company. It is not depending on death, insolvency, and retirement of a shareholder. Stability creates the transactions of continuity between the internal and external sources of the business environment.

So, that is the reason, a joint stock company is stable in nature.

Disadvantages of Joint Stock Company-

The disadvantages of joint stock companies are also known as demerits of joint stock companies. It includes various points such as:-

Disadvantages of Joint Stock Company
Disadvantages of Joint Stock Company

1. The formation is not easy:

The company involves a large number of legal formalities under the guidance if companies act and compliance with several other laws. This is the reason that during the formation of any company, its registration creates very problem and that’s why its a demerit point for the company.

2. Control by a group:

Companies are totally controlled under the guidance or group of board of directors. All the business activities, legal decisions, actions are taken or managed by the board of members. No other members can take decisions without the permission of the board of directors.

3. Manipulation and Speculation:

The shares of the company are bought and sold in the market of the stock exchange. The price or value of a share is determined in terms of the dividend and reputation of the company. There can be manipulated.

4. Delay in policy decisions:

An organization has to fulfill legal procedural formalities before creating a policy decision. Their formalities are very time taken or consuming and this is the reason that there is a delay in policy decisions.

5. Lack of secrecy:

A company can never hide its financial positions. Every year, the company prepares its financial statements and distributes in its shareholders, investors, bankers, and registrars.

This form of statement helps the competitors to know the strong and weak points of the concern. However, in sole proprietorship and partnership, the secrecy is maintained by them.

6. Lack of personal Interest:

In a company, the shareholders or investors don’t take part in the management of a business. The company is managed by its employees and all the works are accomplished by them. But in the case of sole proprietorship or partnership, their owners are taking part in the working area of business and do all work itself.

So, these are the full explanation on the topic of the advantages and disadvantages of the joint stock company

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