Advantages and disadvantages of the joint-stock company

Classical, known to all entrepreneurs kind of business companies is a joint-stock company. This is a specific form of organization, the main difference of which is the way of dividing the company's assets and the order of distribution of its profits. In shares, the size of profit and the amount of liability for liabilities are determined, or rather, the risks that the owner of securities carries because of possible losses. Shareholders do not answer for the debts of society, despite the fact that they are beneficiaries of it. The JSC itself is liable only within the property belonging to it.

The activity that the company has the right to engage in may be anyone permitted by law. All AOs are independent business entities, endowed with legal capacity and can be plaintiffs / defendants in litigations. They are created by combining the assets of the participants, they can be open (the shares are freely distributed among the participants and third parties) or closed. Registration of JSCs, in spite of specific nuances, is a rather elaborate procedure, although it should be entrusted to trusted professionals because of the complexity and multicomponent nature of the process.

The joint-stock companies have many admirers and critics. This form "does not give up positions", and each year the participants register a set of joint-stock companies. On the one hand, management and everyday work of society are more complex and expensive, and on the other hand, it has many opportunities that are not available to other business entities. The main advantage of AO is limitations on the liability of participants, but, for example, LLC operates on similar conditions. What are the advantages and disadvantages of the joint-stock company and what determines the decision of the owners when choosing the form?

Advantages of the joint-stock form

Benefits from the AO are most clearly visible if necessary to mobilize large funds for investment in equipment, large-scale equipment, inventory, and immediately, at the initial stage. If the owners need significant amounts, the issue of shares will be the best way to aggregate capital. It can also be carried out in the process of activities in the event of a shortage of funds. If there are many shareholders, it is easier for society to form initial capital, although the structure of the society and the adoption of strategic decisions will become more complicated.

In addition to the convenience of attracting investments, among the advantages of the form is:

• The possibility of continuous existence and preservation of the original legal entity and its data, regardless of the composition of the owners (with LLC it does not work out that way);
• Protection of personal property of shareholders against claims of creditors;
• A simple mechanism for transferring property rights: the sale of shares is a fast and non-bureaucratic process;
• The breadth of the choice of sources of financing and ways of paying out profits (on simple / privileged securities, with different amounts of dividends);
• Convenient and transparent management and separation of executive and power functions - shareholders have many rights, they are clearly defined, the JSCs are strategically stable;
• Tax privileges - when issuing, buying or selling for money or exchanging the Central Bank, it is not necessary to pay VAT, there is a special "sparing" regime for income tax (only the overall positive result from trading operations is taken into account);
• Liquidity of shares, the ability to receive high profits when successful, and so on.

With obvious advantages, the joint-stock form has its drawbacks - and sometimes they are directly derived from the "pluses".

Cons of Joint Stock Companies

The first thing that "scares" business representatives is the organizational process, its complexity, duration, the abundance of papers and formalities that accompany each change in the work of the JSC. A structure that takes strategic decisions in a company is a meeting of shareholders, but direct managerial and managerial duties are transferred to the executive body (the sole director or collegial board). This often gives rise to serious conflicts between the structures, moreover, minority shareholders have an increase in the total number of holders of the Central Bank, and simply the levers of influence on the management simply disappear. Lack of control over the directorate can lead to real managerial collapse.

Also among the shortcomings of AO are:

• Labor-intensive registration - it is necessary to agree procedures, hold meetings with a large number of participants;
• Complexity of management and significant costs for it - profit distribution and documentation of all transactions is labor intensive, requires the involvement of highly professional specialists;
• The opportunity to work exclusively in the sphere specified in the constituent documentation;
• The obligation to form additional reports, provide regular reports to the authorities, - they should also be made up of qualified and "expensive" experts;
• The complexity of the issuance and circulation procedures of the Central Bank - in addition, the legislation on them often changes;
• The emergence of a double taxation situation - when dividend obligations arise both in relation to the profits of the JSC, and in relation to the income of a private individual - the holder of the Central Bank.

There is also the danger of financial abuse - the issue of unsecured shares, the use of other fraudulent schemes. Therefore, the decision to take must be weighed, weighed its real capabilities and prospects.

The material was prepared in consultation with specialists of RosKo

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