State the limitations of Joint Stock Company.
Answers
Answer:
Explanation:
The following are some of the limitations of Joint Stock Company.
1. Creation of company
Creation of joint stock company is a cumbersome process. It has to undertake lot of formalities to form a company. The following certificates are to be procured before establishing a company.
- Registration certificate,
- Commencement certificate,
- Memorandum and articles of association
- Prospectus.
The company has to print share certificates and even publish prospectus.
2. Lack of Confidentiality
A company cannot maintain confidentiality as it has to distribute statements annually amongst the stock exchanges, shareholders, bankers, registrar, bankers of the country. This helps their peers to gauge the company`s weak as well as its strong points.
3. Taxation
The company is subjected to dual tax. First it is taxed on the profit it earned and then on the dividend earned by shareholders. Along with the above taxes they are subject to corporate tax too.
4. Interference of Government
The company has to well complianed with rules and regulations of the state. It must duly pay its registration fee as well as taxes imposed on it or be ready for a hefty penalty for non-compliance.
Hope this helps.