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Joint Stock Companies

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Types of Firms

1-    Proprietary Firms

2-    Partnerships Firms

3-    Joint Stock Companies

 

Joint Stock Companies

Can raise lage amounts of funds as the number of owners can be unlimited. The total requirements of funds of the organisation is split into the units called as shares and each share carries a denomination value called as face value or nominal value. Anyone can participate by purchasing the shares and becomes the part owner that company to the extent of his shareholding.

·         They have a legal status and get registerd under companies act. These firms can be sued or be sued, can own assets but in no way the shareholders are liable for actions of company.

·         They have limited liability and hence the shareholders are liable to the extent of their shareholding in the company.

·         Segregation of management and ownership. Shareholders are the owners and directors are the managers who work for the owners and operate the firm and earn value for their shareholders.

·         Shareholders can transfer rights.

·         Enjoys perpetual existence and can die only on legal death.

·         Since its legal in structure but do not have a physical body to sign the documents therefore a company is required to have a "Common Seal"  and all the documents with that seal and witnessesd by atleast two directors are legally binding upon the company.

 

Advantages

·         Can raise large amounts of funds

·         Personal property is not at risk

·         Shares can be transferred.

Disadvantages

·        Business operations are subject to elaborate legal procedures and formalities.

There were two types of Limited liability firms-

·        Private Limited Company

·        Public Limited Company

Private Limited Company - 2-50 Shareholders

·        Cannot approach public to buy shares and raise funds

·        The funds can only be collected from the private circulation or from the shareholders

·        Right to transfer the shareholding is restricted since shares should be first transferred to the existing shareholders and if all the existing shareholders do not want to those shares than it can be transferred to anyone.

·        A minimum paid capital of Rs 100000.

Public Limited Company - 7-infinte shareholders

  • Can freely approach the publicto buy shares
  • Can transfer shares to anyone withouit any restrictions
  • Minimum paid up capital required is 5 Lac
  • Its closely regulated under the companies act as compared to the private ltd company.

 

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