Demerits of joint stock company. 8 Important Merits of Joint Stock Companies 2019-03-06

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What are the advantages and disadvantages of joint stock companies?

demerits of joint stock company

This gives a lot of economic and other power to the persons who manage the company. This is one of the important characteristics of joint stock companies that has made it very popular form of business. It is time-consuming and expensive too. The transferability of shares is always welcome in this of organization. This affects the smooth functioning of a company. Tourism inevitably brings with it environmental and cultural degradation.

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What are the Advantages and Disadvantages of Joint Stock Company?

demerits of joint stock company

The rate of acceptance on hire purchase agreements is higher than other forms of unsecured borrowing because the lenders have collateral; • Sales. Unhealthy speculation: The shares of a public company are dealt in on a stock ex­change. This is due to no limit in the membership of public limited company. This public confidence helps a company in many ways. There will be great delay in making decisions. It has to show its financial records — sales, profit-loss, and other information. Smaller public companies may have to make do with less public means of trading their shares e.

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Disadvantages of Joint Stock Company

demerits of joint stock company

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. It has got separate legal existence. This encourages people to invest their money in corporate securities and, therefore, contributes to the growth of the company form of ownership. Firstly, company needs to pay tax for the earned profits and again the shareholders are taxed for the earned income. Social Benefit: The company form of organization has encouraged the habit of saving and investment among the public. Over consumption causes problems such as water shortages, frequent loss of electricity, and over fishing of local waters. It facilities the mobilization of savings of millions for the productive purposes.

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Joint stock companies: features, merits and demerits

demerits of joint stock company

Expert Services: - Due to large financial resources available with joint stock company, it can appoint experts for managing each area or functions of the company business, by paying attractive salaries to them, these brings in a great degree of professionalism and thereby, efficiency in management of business. Also Read: A company has many interest groups. 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 is a company whose stock is owned jointly by the. The customer benefits from a low price and I benefit from a prosperous business. The combination of these things can cause tension between the local residents and the tourist population.

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Disadvantages of Joint Stock Company

demerits of joint stock company

The demerits of Capitalism would be the ability to become so successful in a given area of commerce that you have no competition to act as a check and balance to how the business conducts itself. Scope for growth and expansion: There is considerable scope for the expansion of business in a company. Several legal provisions have to be followed and reports have to be filed. Scope for Expansion: As there is no limit to the number of persons in a company, there is a great scope for expansion of the business. So the shareholders suffer from double taxation.

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What are the advantages and disadvantages of joint stock companies?

demerits of joint stock company

The merits of Capitalism are not theoretical, Capitalism give each individual the ability to be rewarded for their effort to whatever degree they can rise to. Establishing a joint stock organization is not easy. The capital of a company is divided into shares of small denominations so that people with small means can also buy them. This utilizes the inherent selfish motive in man to preserve himself and turns … it into something that benefits the entire community. Some tax incentives are available for export promotion also. In spite of the disadvantages discussed above, it may be concluded that the advantages considerably outweigh the disadvantages of company form of organization and hence it has become universally popular and well established in the business world.

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Advantages and Disadvantages of Joint Stock Company

demerits of joint stock company

In any case, even the number of 50 is far more than the maximum members who can become partners in a firm. Difficulty in Formation - Formation of a joint stock company, especially public limited company involves a lot of legal procedures. It continues for a long period of time because it is unaffected by the death, insolvency of the shareholders directors. Separation of Ownership from Management: In the case of partnership, partners are not only the owners of the business but they take part its management also. It has generated employment for a large number of persons. He has no further liability if he has paid the full value of the shares that he has agreed to pay.


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8 Important Merits of Joint Stock Companies

demerits of joint stock company

Disadvantages of Joint Stock Company are as follows- 1. A lot of precious time, efforts, and financial resources are wasted in complying with statutory requirements. Approval has to be obtained at different levels and different departments before a final decision can be taken. Lack of good labor relations: In sole trading, personal supervision is possible. Social Importance: The company provides an opportunity to mobilize scattered savings of the community. The liability of every member is limited to nominal value of the shares bought by him or the amount of the guarantee given by him.

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What are the advantages and disadvantages of joint stock companies?

demerits of joint stock company

The shareholders have the right to remove then directors if the shareholders find that the directors are insufficient or corrupt. There is lack of flexibility of operations in a company. Cooking the books records is also common to swing the share price. They may manipulate the things with an intention to be re-elected as directors. Hence shareholders assets will not be on stake.

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