Joint-Stock Company
A Joint-Stock Company (JSC) refers to a business institution, where authorized capital is owned by the shareholders. JSC is a forerunner of the present-day corporate enterprise.
The companies are aimed at sponsorship of endeavors that present an overestimated price unapproachable for an individual or authorities. So that the holders of JSC acquire its shares, and, as a result, participate in profits division.
Essence of Joint-Stock Company
Usually, a joint-stock company is liable for all its obligations. Except that the owners don’t bear the responsibility for the enterprise warranties. So the shareholders only suffer losses from the fall in stock value.
The key features of joint-stock companies are the following:
- Risks are distributed.
- Shareholders are actively involved in corporate administration.
- Effective way of enterprise management is anticipated.
- Equity investors are entitled to receive dividends.
Joint-stock company shares could be transferable. While small businesses seek financial assets in banking institutions or through crowdsourcing platforms with greater risks for the investors, corporations, including JSC, enter the stock markets. Approaching only the registered ones must be noted. Shares of privately held companies are transferred among individuals. However, the process often involves an agreement, handing over stocks to the parties concerned, for instance, close family associates.
Experience indicates that funds providers in joint-stock companies could carry unlimited liability. Thus, their personal property might be seized in order to settle the enterprise's debts.
Historical perspective of Joint-Stock Company
Europe of the 13th century has witnessed the first joint-stock companies, but the real extension occurred only in the 16th century. Back then, entrepreneurially-inclined individuals started speculating on the possibilities proposed by the New World.
The preparation of long-distance sea trading expeditions required high investments, so the financial risks were too great for one or several (even wealthy) merchants. Joint-stock companies also provided monetary means during the American explorations. Authorities were willing to obtain new lands, however, couldn’t forecast perils and prospective financial losses.
That’s where the business planning stepped forward. Venture owners started to sell its shares to capitalize their endeavors. Resource availability and trade facilitation were expected by the investors, and these driving forces came to the fore.
The first and the most notorious joint-stock company became the Virginia Company of London. The corporation's goals included American colonial ventures on the east coast. Investors were eager to realize a profit from environmental assets.
A result of decades-long attempts was a Jamestown settlement, where tobacco cultivation started to prosper. The British Council firstly limited its free trade, in order to boost the coffers. But after the company’s standing got weaker, the colony had fallen under control of the Crown.
Division between Public and Joint-Stock Companies
Actually, these terms, along with the company itself, can be mentioned as synonyms. Epoch-making connotation with unlimited liability is the only exception. In other words, a contemporary corporation is the same notion as a joint-stock company, instituted for the responsibility limitation of the equity investor.
There is no doubt that all states possess their own legislation concerning the concept boundaries. As a rule, a process of controlling liabilities is predetermined.
Pros of Joint-Stock Company
To fully understand the point, let’s review several advantages of a joint-stock company, that include:
- Liability. Each shareholder is responsible only for their own invested amount. The risks of considerable losses are excluded. In the case of accounts payable, judicial recovery is applied only to the enterprise property.
- Unlimited number of the shareholders. To implement a business plan, there is no need to rush. State legislation usually does not set a minimum investment amount, the sum can vary. No bureaucratic barriers are meant for joining the joint-stock company.
- Tax benefits. Due to the issuing process, there is no payment of income tax. Lots of initiatives have been developed for enterprises to reduce fiscal liabilities. Some economic domains are even encouraged by the authorities, using subsidies and state guarantees.
- Profitability. In conditions of market competition, large joint-stock companies have a financial advantage over others.
- Adaptability. An enterprise is not troubled by managing a particular amount of shares, as the investors acquire them and increase the stakes, when needed.
