A joint stock company is a type of business involving two or more parties that are involved in a partnership. A joint stock company will issue shares of stock to the members of the partnership based on the amount of financial contribution they provide. This is a type of limited liability because members who own shares of stock will not be liable to the performance of the company. This means that if the business incurs debt, this liability will not be transferred to the stock holders.
There are two major types of joint stock companies. A private company will offer shares of stock to only certain higher ups within the company, such as the owners and directors. Public joint stock companies will offer shares of stock to all members of the company and will sell shares on the open market.
There are certain advantages to taking part in a joint stock company. Having shares of stock within the company will offer a number of opportunities to the holders. Shareholders may be eligible to hold certain positions within the company. They will also be able to vote on annual budget reports and other reports that will affect the future of the company. The shareholders are also entitled to a dividend of the company’s profits based on the amount of share stock that they hold. This means that the company’s profits will be divided by the number of shareholders.
In addition to receiving dividends, a joint stock company may also offer shareholders debentures. Debentures are a fixed rate of interest that is paid to the shareholder annually, or sometimes quarterly. This percentage of earnings does not change based on the performance of the company, which is why a joint stock company is a type of limited liability company. If the business incurs debt, the shareholders will still be entitled to receive their debentures at the same rate.
A joint stock company can be thought of as a combination between a partnership and a corporation. It is the investment of the members who own shares of stock that is used to finance the company. Stockholders are permitted to buy and sell their shares of stock, which is another way in which this differs from a partnership. When a member of the company chooses to leave, their shares of stock are simply sold or transferred to another member of the joint stock company.