This is an association of individuals who come together to form business by contributing capital by way of shares, the body is regarded as an entity, which can sue and be sued.
The shareholders in the business bears the risk involved. The immediate running of the business is done by certain officials who are employed and paid. At the upper level are Board of Directors elected by the shareholders of the company
PUBLIC COMPANY: Is a public enterprises which is made up of, at least, seven persons or as many as possible shareholders.
PRIVATE COMPANY Is made up of two to fifty persons. In this case, the company shares cannot be offered for sales to the public.
COMPARISON OF THE PRIVATE AND PUBLIC COMPANIES
||Membership start from seven minimum without limit|
||Shareholder can easily be transferred.|
||No declaration of balance sheet to the public.|
||Voting rights is allowed and shareholders may participate in the running of the business.|
||Do not escape the hard protocol of registration.|
FORMATION OF A JOINT STOCK COMPANY
In forming a limited liability company, at least, two people (as in the case of private company) or at least seven (as in the case of public company) draws up and signs a MEMORANDUM of association, which shows:
(a) The name of the company fully registered and incorporated.
(b) The address of the registered office.
(c) The objectives of the company
(d) The type of shares and the amount of capital
(e) Tile liability of the members is limited to the amount of shares.
Note that the memorandum contains Article of Association, which states the regulations of the company, when and where meeting shall be held, share transferring, borrowing and powers of the managing directors and their limitations.
Advantages of Joint Stock Company
- Expansion is easy because the company can raise money through many sources
- Economies of large scale production is encouraged.
- Specialization is seen at the esteem.
- The shareholders or the company enjoys the advantages of limited liability.
- Profits accrued are used for provisions of social services.
- There is continuity of the business.
- It is an open company for any person wishing to join.
- The death of a shareholder has no effect on the business
Disadvantages of Joint Stock Company
- It enjoys no privacy: The statements of the company’s account are usually made public.
- Tax advantages are not enjoyed owing to the fact that their account and profits earned are made known to the government.
- There is no room for individual initiatives.
- The shareholders who are the real owners of the business do not control the business.
- The management of the company is made up of salaried persons who often than not pursue policies aimed achieving their own selfish ends
- There is an absolute lack of personal relationship between the shareholders and the employees.
TYPES OF SHARES
(a) Ordinary shares (b Preference shares
(c) Cumulative preference shares (d) Debentures