Similarly there is no restriction for the maximum number of owners in a public limited company. All important decisions are made by either Board of Directors of by General Annual Meetings. This affects the smooth functioning of the company vigorously. The limited liability encourages many people to invest in shares of joint stock companies. It can attract talented persons by offering them higher salaries and better career opportunities. Too many legal formalities have to be observed and several legal documents have to be prepared and filed.
Disadvantages of Joint Stock Company 1. Be realistic about your strengths and weaknesses - consider performing strengths, weaknesses, opportunities and threats analysis swot to identify whether the two businesses are compatible. This enables the company to produce more efficiently and at a lower cost. Embarking on a Joint Venture can represent a significant reconstruction to your business. For formation many provisions of the Companies Act are be complied with. The common seal is an official signature of the company.
It is both expensive and risky. These share are generally transferable. Fraudulent Management: Many a time unscrupulous promoters by presenting the prospectus as a rosy picture manage to get capital from the public. The shareholders play an insignificant role in the working of the company. Majority group always dominate over the minority group whose interest are never represented in the management.
There is no direct relationship between efforts and rewards. This form is suitable where large resources are required and the production has to be carried out on a large scale. The stability of business is of great importance to the society as well as to the nation. Since Company A is not directly involved in the production and promotion process, the pressure is on the latter companies. Due to the recent amendments in the Turkish Commercial Code and the equity principle between domestic and foreign investors, the number of established local and international companies has been increasing in recent years in Turkey.
Encourages Speculation: This form of organization encourages speculation on the stock exchange. The society is supplied with enough quantity of goods. This can have a negative impact on the effectiveness of the joint venture. If some business opportunity arises and a quick decision is needed, it will not be possible to arrange meetings all of a sudden. On the other hand, control is in the hands of those who have no stakes in the company.
Company works in its own name under a common seal. The shareholders become mere pawns in the game of a small coterie of directors. If need for more funds arises, the number of shareholders can be increased. A joint stock company is in a position to raise capital, because a number of financing instruments are available to the company like share, debentures, bounds and retained earnings etc. A company cannot maintain secrecy of its financial position. Liability of the members in a joint stock company is limited to the value of shares they held by them in the company. It encourages many people to invest.
These conflicts generally lead to inefficiency in the management and reduce employee morale. Following are some of the advantages and disadvantages of the joint stock company. Delay in formation may deprive the business of the momentum of an early start. You may also want to study what similar businesses are doing, particular those that operate in similar markets to yours. Flow of Risk: In sole proprietorship and in the partnership business, the risk is shared by few persons.
The business has long life and it is not affected by the incapacity of shareholders. If the business remains well managed, it can live on indefinitely. It facilities the mobilization of savings of millions for the productive purposes. 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. After the payment of these taxes, the remaining income is distributed among the shareholders, and then all the shareholders are personally liable to pay the taxes individually on their personal incomes. It can benefit from large scale production due to various economies of scale.
Partnerships and joint ventures can be similar but in fact can have significantly different implications for those involved. For this reason, many people are reluctant to incorporate this business. There is a greater facility for the formation of a private company as compared with a public company. The credit standing of the company is also very high which means that the banks and other financial institutions shall readily give loans and advances to them. The employees also disclose the secrets of the business.
It is also difficult to keep personal touch with the customers and the employees. The life of company is not dependent die or become insolvent. These economies will help company to provide quality goods at lower cost to the consumers. This promotes confidence in the minds of the public. No shareholder is burdened with more than what he has paid as the price of shares hold. Once, a company is formed, it continues for an unlimited period until it is formally liquidated.