Joint Stock Company Definition

Introduction:

Aman: Prateek, I want to Invest my money. Please suggest some options for it.

Prateek: Aman, there are numerous ways to invest money, but one of the safest ways is in the stock market.

This is a conversation between two friends; one wants to invest money, and the other provides an option for him.

From ancient times we witnessed investment and business entity formation amongst different corporates as key to development. By keeping this in mind, someone rightly says we can achieve incredible progress with the proper investment. Economic advancement is one of the most precious gifts that the current world has; it led to the development of other sectors too. The economy and its related concepts are something that helps humanity in every possible way. With economic tools, people effectively perform their work and raise their standard of living. It helps people by offering numerous ways to invest and earn profits from it. By keeping the profits in mind, the government started several economic tools which support the nation's growth and development. Some tools that allow trading in share markets are Mutual Funds, SIP, etc.

Today's world is witnessing rapid growth and development, and in this changing world, every sector of the economy has to play a very important role.

Share markets help to make complex investments very easy; they provide opportunities to invest in those products that are difficult to invest in at any point in time. Out of the developing concept in economics, the most notable that has shaken the world is the development or start of the share market and its related concepts.

Every day the need for medium and small investments is increasing daily because the needs of the population increase daily, and everyone wants to earn profits most safely. Now share markets offer several products for investment that people require to invest.

The most notable aspect of the share market is the starting of Medium and Small investments in trading. Trading in share markets is considered the biggest achievement in the economic field because they earn more profits with less capital. In today's time, everything is directly or indirectly related to the needs of people. Almost all fields currently design or develop their products by keeping consumers in mind. Share Market is not only required for investment purposes but also offers jobs to a large chunk of the population, and numerous companies are running.

Moto Behind Joint Stock Company:

As we already know, investors always try to find better ways to invest, and the main purpose behind the investment is profit. There are numerous ways to invest in the market; some of the most notable ones are Systematic Withdrawal Plans (SWP), Unit Linked Insurance Plans (ULIP), Equity Linked Saving Schemes (ELSS), and many others.

Investors always wanted to increase their returns without the hassle of tracking their portfolios and trading in the market. Thus the Share market is the basis for the investment as it provides the platform for people to invest their money legally.

What is a Joint Stock Company?

A joint stock company is a type of business entity under which a share of the company is brought and sold by the shareholders of the company. Each shareholder holds shares in the company based on the proportion of investment or shares brought by the shareholder. Shareholders have the power to transfer their shares to others shareholders without any effects on the continued existence of the company.

In today's times, the joint stock company is similar to incorporation; it means possessing a legal personality separate from shareholders. Also, it is synonymous with limited liability, under which shareholders are liable for the company's debts only to the value of the money they have invested in the company. Because of that reasons, joint-stock companies are commonly known as corporations or limited companies.

Numerous jurisdictions provide registering joint-stock companies without limited liability. They are known by different names in different parts of the world; for instance, in the United Kingdom known as unlimited companies. In the United States, they are known simply as joint-stock companies. A Joint Stock company has a legal existence; it is a type of artificial person separate from the person composing it.

A Joint Stock company is created by law, established for commercial purposes, and comprises many members. The shares of each member can be purchased, sold, and transferred without the consent of other members.

Features of Joint Stock Company:

In the above paragraphs, we discussed what a is Joint Stock Company. Joint Stock companies are important in numerous ways; these companies are considered the backbone of the economy. Let us understand some of the main features of a Joint Stock Company -

1. The first and most important feature of a joint stock company is that it is considered the ancestor of the modern-day company. There are numerous legal differences between them, but they are the ancestors of modern-day corporations.
2. A joint-stock company is owned by its shareholders; shareholders can buy and sell shares freely.
3. From the history, we conclude that the shareholders of a joint-stock company could bear unlimited liability for debts the company owes.
   In the U.S., incorporation limits shareholder liability to the face value of their shares.
4. There are numerous types of joint Stock companies, but the most remarkable example of a Joint Stock Company is the English East India Company.

Characteristics of a Joint-Stock Company:

The most striking characteristic of a Joint Stock Company is that the company's shareholders have unlimited liability for the debt of the company. For instance, in the U.S., the legal process that registers a company as a corporation or limited liability company reduces liability to the face value of the stock. And that stock is owned by the shareholder or the contribution of the LLC member. In the case of Great Britain, the term "limited" has a similar meaning. Shares belonging to the shareholders of the joint Stock company are transferable.

If any joint-stock company is public, its shares are traded on registered stock exchanges. And on the other hand, the Shares of a private joint-stock company are transferable between parties. But the transfer process in the private Joint Stock company is limited by agreement, for example, to family members. From the numerous events in the past, we conclude that, due to the nature of joint-stock company unlimited liability, a shareholder's personal property could be seized to pay off debts in the event of a company collapse.

Types of Joint-Stock Companies:

Numerous types of joint stock companies are present in modern times. The most remarkable types of joint stock companies are-

1. Registered Company:

A registered Joint Stock Company is a business entity registered with the state. Under this, local authorities can legally conduct business in the organizational industry. It includes the following business entity categories- corporation, S-corporation, limited liability partnership, limited liability company, etc.

2. Chartered Company:

This is the second type of business entity considered the Joint Stock Company. Under this type of company, a business entity is incorporated under a nation's royal charter. Chartered companies have certain privileges related to conducting their business operations.

3. Statutory Company:

Statutory companies are another business entity included in the Joint Stock Company category. A statutory company is a business entity established by an act of a nation's legislature. The primary aim is to provide public services that benefit the populace. The act details the company's responsibilities and privileges.

Benefits of a Joint-Stock Company:

The Joint Stock Company offers numerous advantages. The following are the benefits of the Joint Stock Company -

1. There are numerous shareholders in the Joint Stock Company; due to that, a joint Stock company has access to large amounts of money. And this large amount of money helps to build a business.
2. The Shareholders have direct power to say in decisions relating to the management and operations of the company. Apart from that, they also have the right to elect the board of directors.
3. If the Joint Stock Company is a public business entity, its shares can be bought and sold freely on stock exchanges. And on the other hand, if it is considered a private business entity, its shares may be traded or restricted by the company.
4. Today, joint-stock companies provide shareholders with limited liability for debts that a company incurs.
5. A joint stock company can issue new shares and debentures by filling the additional capital requirements. These shares are used for additional capital requirements.
6. There is no ceiling limit on the number of shareholders in public companies. On the other hand, a private company may set such limits.
7. Joint Stock Company offers diversity in risk, as investment risk is diversified among many shareholders, not borne by one or two individuals.
8. Public joint-stock companies support good corporate governance.

Conclusion

A joint stock company is necessary very vital for the economy. It led to the development of the economy rapidly, and provide jobs to millions of people.