you find vast opportunities in expanding our business which you have been running as a partnership firm some body suggested you to form a joint stock company State any three advantages that you will have now and three difficulties that you will face in doing so
Answers
The advantages of forming a joint stock company instead of carrying on partnership business are:
i. Large capital - It is possible to mobilize a huge amount of capital.
ii. Vast scope of expansion - The huge amount of capital collected by means of shares and the earnings of the company provide sufficient scope for expansion.
iii. Limited liability - The members have a limited liability. They cannot be asked to pay more than the nominal value of their shares.
The disadvantages of forming a joint stock company:
i. Reckless speculation is encouraged - Sometimes speculation in shares is encouraged by the management of the joint stock company for its personal gains.
ii. Delay in decision making - The Board of Directors makes all the decisions. It takes a long time to make decisions as the decisions are not made by an individual alone.
iii. Conflict of interests - The management body is not composed of owners so its members have no interest in the business. They do not care for the interest of the shareholders.