Question

Essay Type Question:
State the meaning of Joint Stock Company and explain it's merits and limitations.

Answer 1

A joint-stock company is a business entity regarded as an artificial person where the funds for running the business is raised through issuing shares to public and the shares of the company's stock can be bought and sold by shareholders.

The merits of a joint stock company are:

1. Separate legal entity

2. Abundant Capital

3. More Managerial efficiency

4. Optimum utilization of resources

5. Limited liability of the shareholders

The demerits of a joint stock company are:

1. Delay in decision due to legal formalities

2. High incorporation cost

3. Lengthy process for formation as well as dissolution

4. Loss of communication or chances of grapevine due to such a long communication chain