Demerits of joint stock company. Disadvantages Of Joint Stock Company 2019-01-28

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Merits and demerits of joint stock company

demerits of joint stock company

Limited Liability : -As compared to other forms of organization a joint stock company is the best type of business organization. Moreover, for taking various decisions and getting them approved from share holders, they have to hold board Meeting and share holders meeting, for which a proper procedure has to be followed. Profit Sharing: Profit and loss of company is divided among the shareholders according to the nominal value shares held by them. But a sole trading concern comes to an end with the death of a sole trader, and in the case of partnership, death, retirement, or insolvency of any member of the partnership would dissolve the firm. Loans can be taken from banks and other financial institutions by the company. Lack of motivation: The directors and other officers of a company have little personal involvement in the efficient management of a company. Scope for growth and expansion: There is considerable scope for the expansion of business in a company.


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Disadvantages of Joint Stock Company

demerits of joint stock company

This feature attracts large number of investors to invest in the company. But the same is not permitted to private limited company. In proprietorship there is no scope for conflict and in a partnership continuous conflict results in dissolution of the firm. Firstly, company needs to pay tax for the earned profits and again the shareholders are taxed for the earned income. Often directors try to mislead the members and manipulate voting power to maintain and perpetuate their control. Again, there may be disputes between the directors and shareholders.

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OMTEX CLASSES: Merits and Demerits of Joint Stock Company?

demerits of joint stock company

Costly and difficult to form: Number of legal formalities must be observed by the promoters of the company. Disadvantages of Joint-Stock Company: In spite of so many advantages of company form of organization, there are many drawbacks and limitations from which it suffers. They can vote to elect the board of directors and the auditors of the company and can also participate in the general meetings of the company. Formation is Difficult: The formation of a company involves a long-drawn-out complex procedure. Registration of joint stock companies is mandatory. Flow of Risk: In sole proprietorship and in the partnership business, the risk is shared by few persons.

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Disadvantages of Joint Stock Company

demerits of joint stock company

The Board of Directors are professional managers who efficiently look after the management and control of the organisation. These difficulties discourage many persons from starting companies. But they misuse the power, because of the inactiveness and passive nature of the share holders. So the shareholders suffer from double taxation. Specialised Management: -A Joint Stock company can afford to appoint specialised experts in the field of production and distribution. This certainly introduces an element of socialisation of business ownership.

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My Learnings: Demerits of a Joint Stock Company

demerits of joint stock company

Social disadvantages: Joint Stock Company has certain social disadvantages such as monopolistic tendencies, wasteful expenditure, wastage of resources, pollution of air, water and environment etc which are not only harmful for the organization but also for the society. The decisions are taken jointly by the Board of Directors. Further, anyone can purchase the shares and leave the responsibility of management to the body of persons called directors. 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. The risk of loss id divided among am large number of persons. All these facilitate the concentration of economic power in the hands of a few persons. Excessive Government Control: A company form of organization is very much controlled by the government and it has to observe many provisions of the different regulations of the government.

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DEMERITS OF JOINT STOCK COMPANY

demerits of joint stock company

Often directors try to mislead the members and manipulate voting powers to maintain their control. Its existence is not affected by the death or insolvency of its members. Several legal provision have to be followed and reports have to be filed. It has also indirectly helped the growth of financial institutions such as banks and insurance companies by providing avenues to invest their funds. There is no limit to the number of shareholders in a company.


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Disadvantages Of Joint Stock Company

demerits of joint stock company

Usually, there are four different types of preference shares, i. Bureaucracy: Planning, regulating and decision making of other aspects comes from directors, it gets practiced of salary taken by the third party. Follow up arrangements must be considered in advance. The company is run by the Board of Directors. Owing to the difficulty of getting the requisite quorum and the presence of diverse interests, which may lead to disagreement, prompt decision cannot be taken.

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OMTEX CLASSES: Define Joint Stock Company? Explain its merits and demerits?

demerits of joint stock company

Therefore, the burden of risk upon any individual is not huge. Directors of a company may indulge in speculation on the basis of inside information for their private gain and at the cost of small investors. There is adequate scope for growth and expansion of business. It also helps a company in tapping more resources. The tourism industry has a tendency to view local people as either a pool of waiters, bellhops, laundresses, and gardeners; or performers and spectacles for the tourists to see. The second factor is that in order a company can issue shares of smaller denomination, thus, suiting the convenience issue shares of smaller denomination, thus suiting the convenience of small investors also. It enjoys goodwill and holds better image among the public if the company declares dividend regularly.

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What are the merits and demerits of Joint Stock Company?

demerits of joint stock company

A shareholder cannot be held liable for the acts of the company. Further, as companies cannot be managed by all the shareholders who are large in number, it has to employ professional managerial personnel and this has helped the development of management as a profession. But in the case of sole proprietorship and partnership, the liability is unlimited and in the case of the latter, it is also both joint and several. Democratic Management and Control: -The management and control of a joint stock company is in the hands of highly skilled Board of Directors. The risk of loss is spread among various members. Cultural Impacts of Tourism In addition to tourism's environmental impacts on host destinations, there are also many important cultural issues to consider.

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Joint Stock Company: Definition, Features, Advantages and Disadvantages

demerits of joint stock company

This also leads to dilution of business secrecy. Moreover, a company gets some tax concessions, if it establishes operation in backward area. In a joint stock company, ownership is represented by shares, which may either be a general equity or a preferential equity. Statutory Regulations: - the formation of companies is regulated by the provisions of the Indian companies Act 1956. This right to sell shares of joint Stock Company gives an scope to attract large number of shareholders. The shareholders own the company.


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