What is a joint stock company?


Quick Answer

A joint stock company is a business entity owned by a set of individuals who hold capital in the form of transferable shares of stock. The owners have unlimited liability for the debts of the business.

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Full Answer

A joint stock company is an association of a large number of individuals that form a business enterprise by agreement. These individuals invest capital to finance the company, which they pool into a common fund. The company issues transferable shares of stock to the owners that they can trade on the secondary market. Selected central managers control the company, such as a board of directors, governors or trustees.

A joint stock company can access the liquidity and financial reserves of the stock market. However, it has the restrictions of a partnership because the stockholders are personally liable for the debts of the business, according to Investopedia.

Similar to a corporation, a joint stock company has perpetual succession, which is the process by which an owner can transfer stock to a stranger who then becomes a member of the business. This transfer has no impact on the functioning of the company because the individual stockholders do not have the authority to act on behalf of the organization or its members, as stated in the Legal Dictionary.

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