Candlestick Trading Blog
November 9, 2007
Joint Stock Company
| A joint stock company is a type of business that falls between what is known as a partnership and a corporation. Certificates of ownership or dividend stocks are issued by the company in return for each contribution made by shareholders. The capital is formed by contributions made by shareholders who are allowed to transfer their ownership interest at any point in time by selling their shares to others. In a joint stock company, stockholders are liable for company debts as well. A partnership is an organization in which two or more individuals manage the business and both owners are equally liable for debts from the business. A corporation is a legal entity that is separate from its owners and its shareholders have the right to participate in the profits through stock dividends and the appreciation of stock. A corporation is different from a joint stock company in that shareholders for a corporation are not liable for the company’s debts. Its members are also called shareholders in that every member has some shares in the business dependent upon the total amount of capital contributed by that member. (Understanding the basics of stock market investing should help you when reading this article.) There are two kinds of a joint stock company including a private company and a public company. In a private company, the shares are not for sale on the stock market and the total membership cannot exceed 50 individuals.The shares are not allocated to its members and are not freely transferable between them. The public company offers it shares on the open market and they are listed in the stock exchange. A public company requires a minimum of seven members and there is no set maximum allowed membership. Unlike the private company, the shares allocated to the members are freely transferable. The private companies can also raise funds from the general public by selling it shares or accepting fixed deposits, unlike the private company. There is also third type of joint stock company in Britain called a guarantee company. This company is formed by societies and organizations for charitable reasons. In a guarantee company no shares are issued and there is no profit to be distributed. The formation of the concept of the joint stock company can be traced back to medieval times in Europe when large amounts of wealth in Europe were controlled by corporate entities. The most prevalent were church lands which controlled a substantial portion of the land in Western Europe. This concept was also a common practice in Italian maritime states in that the operation of ships was funded by dividing the funding of the construction of these ships into a number of shares. The owners of these shares (who would now be referred to as shareholders) were responsible for funding the voyages and dividing up the profits made as a result of these voyages. This investment philosophy along with many investment strategies were also formed as a result of the joint stock company. There are many advantages of a joint stock company including limited liability held by the members. The members are only responsible for the extent of the value of the shares held by them. As a result this encourages the owners to take more of an investment risk because many people will invest due to the limited liability. A joint stock company is also able to collect a large amount of capital made by small contributions from a large group of people, and it also offers employment to a large number of people. Another advantage is that is often has the resources to product large-scale production. This is a direct result of the fact again, that it has a relatively large amount of capital. There are many positive characteristics of a joint stock company however they are very difficult to form. The formation of it is a very complicated procedure that is highly regulated by the government, thus allowing for heavy penalties for non-compliance. For these reasons and more, the joint stock company is suitable for a business which involves a very high level of risk. You may want to research further the characteristics of a joint stock company if you are interested in investing in stock. Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
 |
 |
|
 |
|
 |
|
 |
--------------------------------------------------------------------
0 Comments:
Post a Comment
<< Blog Home