Benefits Of Joint Stock Company

A joint stock company is a business organization. It is owned by general public who buy it
shares. The person who holds shares of the company is known as shareholder. The company is
run and managed by board of directors elected by shareholders. Following are some of the
advantages and disadvantages of the joint stock company.

Benefits of Joint Stock Company

1. Limited Liability
The liability of shareholders is limited to the amount they have invested in the business. It
means their personal property remains safe in case of bankruptcy. This advantage encourages
large number of investors to invest in the business.

2. Large Capital
In the public limited company there is no limit of shareholders. This advantage helps the
company to collect huge amount of capital from large number of shareholders. Furthermore, the
company can raise capital to a large extent through issue debenture to public.

3. Better Management
In the company ownership is separated from its management. The owners or shareholders cannot
take part in the management of the company. The company is managed by board of directors
elected by shareholders. The directors hire experienced and qualified personnel for efficient
management. The efficient management may help the company to take rational decisions and can
produce better results for the company.

4. Transfer of Shares
The shares of the company are easily transferable. A shareholder can convert his holding into
cash by selling his shares at any time in the stock exchange. This brings liquidation of
investment.

5. Stability
The company has long life compare to sole proprietorship and partnership. It is not depending on
death, retirement, insanity, or bankruptcy of a shareholder. Also change of ownership and
management does not affect the continuity of the business.

6. Ease of Expansion
A company has unlimited opportunities to finance new projects by issuing shares and debentures.
It can also transfer the portion of its profit to reserve which can be used for future expansion.
7. Public Confidence
A company is required to submit its financial statements (Income statement and Balance sheet)
to government. The accounts are audited by chartered accountants to make the accounts free
from errors and frauds. This enables the company to enjoy public confidence.

8. Perpetual Existence
A company is an artificial legal person created by law which has its own independent legal
status. Its existence is not affected by the death or insolvency of its members.

9. Large Scale Operation

The capacity of the corporate organizations to raise the funds is comparatively high which
provide capital for large scale operations. Hence opens the scope for expansion.

10. Research and Development

It invests a lot of money on research and development for improved production process,
improving quality of product, designing and innovating new products etc.