The following are the main points because of which the Joint Stock Company aids in development of trade and commerce.
1. Large Capital: -It is possible for a joint stock company to raise huge financial resources. There is no maximum limit on membership in a public limited company. Shares issued are available in small denominations. Therefore people can invest any small amount as per their needs and capacity due to the features of limited liability. Free transferability of shares etc. many investors are attracted to become shareholders of the company. Loans can be taken from banks and other financial institutions by the company.
2. Democratic Management: - Though shareholders elect the Board of Directors, who manage the business efficiently, the directors are accountable to shareholders, their activities are supervised and controlled by shareholders indirectly.
3. Transferability of Shares: -There is free transferability of shares in a public limited company. No permission is required to be sought from the directors or members of the company for buying or selling shares. However, a private limited company, does not permit free transferability of shares.
4. Limited Liability: - The liability of a member in a public limited company is limited to the extent of the unpaid amount of the shares held by him. Since the company has an independent legal status, its liabilities are its own.
5. Expert Services: - Due to large financial resources available with joint stock company, it can appoint experts for managing each area or functions of the company business, by paying attractive salaries to them, these brings in a great degree of professionalism and thereby, efficiency in management of business.
6. Relief Taxation: - The companies are required to pay taxes at flat rate. The amount of tax on a high taxable income therefore may be less for a joint stock company than individuals in a same tax bracket.
7. Public Confidence: - Joint stock company enjoys public confidence. The working of joint stock companies in India is governed by the provisions of Indian Companies Act, 1956.
8. Scope for Growth and Expansion: - There is possibility of growth and expansion in the company business. The company can raise large financial resources. Attractive salaries can be paid to engage the services of experts for business expansion and for managing the business professionally.
Because of the above important points there is a steady and wider growth in trade and commerce.
