Financial Applications of Business in Joint Stock Companies

Joint stock companies:

A joint-stock company (JSC) is a type of corporation or partnership involving two or more individuals that own shares of stock in the company. Certificates of ownership ("shares") are issued by the company in return for each financial contribution, and the shareholders are free to transfer their ownership interest at any time by selling their shareholding to others.

In modern company law the existence of a joint-stock company is often synonymous with incorporation (i.e. possession of legal personality separate from shareholders) and limited liability (meaning that the shareholders are only liable for the company's debts to the value of the money they invested in the company). And as a consequence joint-stock companies are commonly known as corporations or limited companies.

Advantages

Ownership of stock confers a large number of privileges. The company is managed on behalf of the shareholders by a Board of Directors, elected at an Annual General Meeting. The shareholders also vote to accept or reject an Annual Report and audited set of accounts. Individual shareholders can sometimes stand for directorships within the company, should a vacancy occur, but this is uncommon.

The shareholders are usually liable for any company debts that exceed the company's ability to pay. However, the limit of their liability only extends to the face value of their shareholding. This concept of limited liability largely accounts for the success of this form of business organization.

Ordinary shares entitle the owner to a share in the company's net profit. This is calculated in the following way: the net profit is divided by the total number of owned shares, producing a notional value per share, known as a dividend. The individual's share of the profit is thus the dividend multiplied by the number of shares that they own.

Role of Treasurer and Board Finance Committee

If your small business is a corporation, you would do well to find someone...