What is a joint-stock company, its advantages and disadvantages

A joint-stock company cannot arise on its own; several people are required for its formation. Each of them must contribute money to the total capital, which is called the authorized capital. Having made their share in the production or development of a common company, they gain the right to manage a jointly created organization.

What is a joint stock company and how is it formed?

In order for a company to obtain the status of “joint-stock”, there must be three main characteristics: the presence of a common (authorized) capital, the property liability of the company’s participants, which is determined by the size of their contribution, the division of the authorized capital into shares held by the participants of the created company. The fact that shareholders have such rights and contributed money is confirmed by the presence of shares (securities), which they receive in return for the invested funds. In fact, a joint stock company is a business or commercial organization managed by shareholders.

What are the benefits of this legal form of business?

There is no restriction on the authorized capital. This means that everyone can join a joint-stock company, making a contribution. At the same time, the number of participants can constantly grow, and if deposits are received, then the organization will develop, constantly increasing its income from production.

Shareholders themselves decide how much money they want to invest in production. By investing money in the authorized capital, participants can make big profits (dividends), but they can also lose their investments if the company goes bankrupt. But even in this case, they will not lose more than they invested, as they are not responsible for the organization.

The advantage is the ability to leave the company at any time by selling their shares to other participants. At the same time, the activities of the organization will not stop.

Management in a joint-stock company is carried out only by professional managers who are united in a team. A shareholder can independently resell his shares and buy them from other holders. To enter society, a small amount is needed. If a person does not have it, but wants to become a shareholder, the joint-stock company can help him in obtaining loan funds and act as a creditor.