DMI.

ST EUGENE UNIVERSITY
Business Studies
UNIT III: Forms of Business Organizations II

Joint Stock Company

Meaning: A Joint Stock Company is a type of business organization where ownership is
represented by shares of stock. Shareholders of a Joint Stock Company are the owners of the
company and have limited liability for the company's debts. This means that the shareholders
are only responsible for the amount of capital they have invested in the company and not for
any additional debts the company may incur.
Definition: A Joint Stock Company is a type of business organization in which the capital is
divided into transferable shares, the shareholders of which are only liable to the extent of the
capital they have invested.
Features:
 Limited liability for shareholders: Shareholders are only liable for the amount of
capital they have invested in the company and not for any additional debts the
company may incur.
 Easy transfer of ownership: Ownership of a Joint Stock Company can be easily
transferred by buying and selling shares on the stock market.
 Separate legal entity: A Joint Stock Company is a separate legal entity from its
shareholders, meaning it can enter into contracts, sue and be sued, and own property
in its own name.
 Raising capital: Joint stock companies can raise capital by issuing and selling shares
to the public.
 Continuity: The life of a joint stock company is not affected by the death, insanity, or
insolvency of any member.
Types of Joint Stock Company:
 Private Joint Stock Company: A private Joint Stock Company is one where the
number of shareholders is limited to 50 and the shares are not traded on the stock
exchange.
 Public Joint Stock Company: A public Joint Stock Company is one where the
number of shareholders is not limited, and the shares are traded on the stock
exchange.

John
Bosco
Merits of Joint Stock Company:
 Access to large amounts of capital: Joint Stock Companies can raise large amounts of
capital by issuing shares and selling them to the public.
 Limited liability for shareholders: Shareholders are only liable for the amount of
capital they have invested in the company and not for any additional debts the
company may incur.
 Ability to raise funds through sale of shares: Joint Stock Companies can raise funds
by issuing new shares and selling them to the public.
 Professional management: The management of a joint stock company is usually in the
hands of professionals who have specialized knowledge and experience.
 Large scale production: Joint stock companies can undertake large scale production
and distribution of goods and services.
 Creditworthiness: Joint stock companies have a good creditworthiness and can borrow
money easily from banks and financial institutions.
Demerits of Joint Stock Company:
 Complex management structure: The management structure of a Joint Stock Company
can be complex, with a board of directors, shareholders, and various other
stakeholders.
 Costly to set up and maintain: Setting up and maintaining a Joint Stock Company can
be costly, with legal and administrative expenses.
 Lack of personal involvement and control for shareholders: Shareholders of a Joint
Stock Company have limited control over the management of the company and may
not be personally involved in the day-to-day operations.
 Risk of speculation: Joint stock companies are subject to the r isk of speculation and
manipulation of stock prices by unscrupulous elements.
 Exploitation of consumers: Joint stock companies may exploit consumers by charging
high prices and providing poor quality goods and services.

Suitability of Joint Stock Company:

Joint Stock Company is suitable for large scale business, where large amount of capital is
required, and the management needs to be separated from the ownership. It is also suitable
for businesses that plan to go public and raise funds through the sale of shares. Businesses
that require professional management and want to undertake large scale production and
distribution.

John
Bosco
Joint Stock Company versus Partnership:
In a partnership, the partners are jointly and personally liable for the debts of the business. In
a Joint Stock Company, the shareholders have limited liability and are only responsible for
the amount of capital they have invested in the company. Additionally, ownership in a
partnership is not easily transferable, while in a Joint Stock Company, shares can be bought
and sold on the stock market.
A partnership is more suitable for small businesses where the partners have a personal
relationship and are willing to share the management and control of the business. A Joint
Stock Company is more suitable for large businesses that require large amounts of capital and
professional management.
Cooperative Form of Organization:
Meaning: A Cooperative is a form of business organization where the members are also the
owners and have a say in the management of the business. The main objective of a
Cooperative is to provide a service or a product to its members at a fair price.
Definition: A Cooperative is a business organization owned and controlled by the people
who use its services or products.
Features:
 Member-Owned: The members of a Cooperative own and control the business.
 Members' Economic Participation: The members actively participate in the economic
activity of the Cooperative by providing capital, labor, or skills.
 Autonomy and Independence: The Cooperative is autonomous and independent and is
not controlled by any external organization.
 Service to Members: The Cooperative's main objective is to provide a service or a
product to its members at a fair price.
 Education and Training: The Cooperative provides education and training to its
members to help them participate in the management and operation of the
Cooperative.
Classification of Cooperative Societies:
 Consumers' Cooperative: A Consumers' Cooperative is a type of Cooperative where
the members are consumers who come together to purchase goods and services at a
fair price.
 Producers' Cooperative: A Producers' Cooperative is a type of Cooperative where the
members are producers who come together to sell their products at a fair price.
 Credit Cooperative: A Credit Cooperative is a type of Cooperative that provides credit
to its members.

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Bosco
  Workers' Cooperative: A Workers' Cooperative is a type of Cooperative where the
members are workers who come together to own and operate the business.

Merits of Cooperative Societies:

 Member-Ownership: The members of a Cooperative own and control the business.
 Fair Price: The Cooperative provides a service or a product to its members at a fair
price.
 Economic Participation: The members actively participate in the economic activity of
the Cooperative.
 Autonomy and Independence: The Cooperative is autonomous and independent and is
not controlled by any external organization.
 Education and Training: The Cooperative provides education and training to its
members to help them participate in the management and operation of the
Cooperative.
Demerits of Cooperative Societies:
 Limited Capital: Cooperative societies may have limited capital as the members may
not be able to invest large sums of money.
 Limited Scope of Operations: Cooperative societies may have limited scope of
operations as their main objective is to serve their members.
 Limited Professional Management: Cooperative societies may have limited
professional management as the members may not have the necessary skills and
experience.
Suitability of Cooperative Societies: Cooperative societies are suitable for small scale
businesses where the members have a personal relationship and are willing to share the
management and control of the business. They are also suitable for businesses where the
main objective is to provide a service or a product to its members at a fair price.
Cooperative society versus Joint Stock Company:
Cooperative societies and Joint Stock Companies have some similarities and some
differences. Both are forms of business organizations, but they differ in terms of ownership
and control. In a Cooperative society, the members are also the owners and have a say in the
management of the business. In a Joint Stock Company, the shareholders own shares in the
company and elect a board of directors to manage the business. Additionally, in a
Cooperative society, the main objective is to provide a service or product to its members at a
fair price. In a Joint Stock Company, the main objective is to make a profit for the
shareholders. Both forms have their own advantages and disadvantages and are suitable for
different types of businesses.

John
Bosco
 John
Bosco