What are the differences between a private limted companies and joint stock companies?

Answer 1

difference between partner ship firm and join stock company

partnership:

1.partnership is an association of individuals competent to enter into contracts, who agree to carry on the business in common with a view to earn and share profits.

2.registration is not compulsory

3.there is unlimited liability.

4.all partners are mutual agents

5.number of partner cannot exceed 10.

joint stock company:

1.this company is an artificial person recognised by the law, with a distinctive name, a common seal, a common capital and carrying limited liabilities.

2.registration is compulsory.

3.there is limited liability.

4.a member is not an agent of another member.

5.in case of pvt the members is 50 & in case of public it is unlimited.

Answer 2

Partnership and a company differ in many ways. Following are the main differences between them:

(1) Formation : A partnership is easily format without much expenses. The legal formalities for registration are simple and less time consuming. It is registered under Nepal partnership Act, 2020. A company is incorporated by registration under Company Act 2053. Lots of legal formalities have to be observed for registration of a company.

(2) Legal Entity : A partnership has no distinct legal entity. So the acts of the firm bind the partners and the acts of individual partners ordinarily bind the firm. But the company has a distinct legal entity separate from that of shareholders. It may act in its own right without making shareholders liable for it.

(3) Number of Members : The minimum number of partners in two and maximum number is not prescribed according to Partnership act. In a private company the minimum number of members can be one while the maximum number is fifty. In a public company minimum number is seven while there is the maximum limit.

(4) Liability : In partnership, the liability of the partners is unlimited and they are jointly and severally liable for the debts of the firm. The liability of the shareholders of a company is limited up to the face value of the shares purchased by them.

(5) Existence : A partnership does not have stable life and perpetual existence. But a company has a continuous and perpetual succession. The change of membership or death of bankruptcy of the member does not affects its existence.

(6) Transfer of Shares : A partner can transfer his share only with the consent of all partners. But shareholders of a company enjoy perfect freedom to transfer their shares. However, there is some restriction in a private company.

(7) Management : Every partner has the right to take part in the management of the firm. But in company every shareholder has no right to take part in the management. Instead they elect Board of Directors, who manages the company.

(8) Capital : In partnership, partners invest capital according to their wish and the consent of other partners. The capital of a company is divided into shares. It has no right to issue shares more than the authorized capital.

(9) Final Accounts and Audit : A partnership is not under statutory obligation for the preparation of final accounts and audit the books of accounts. However, final accounts of the company must be prepared, distributed among the shareholders and audited by a qualified auditor.

(10) Dissolution : A partnership is dissolved according to the agreement among partners or by the court. A company is dissolved only through legal procedures.

Answer 3

In a partnership, there can be a maximum of 20 people. Because of this limit, the amount of capital that can be generated is limited. Also, because of the unlimited liability of partnerships, the partners may be discouraged from taking huge risks and further expanding their business. To overcome these problems a public or a private company may be formed.

Private and public companies are much better investments because of "Limited liability". This means that if an investor has invested Rs.1000/- in a particular company, and the company goes bankrupt, the investor only looses the money he has invested. To pay of the debt, the investors property, bank accounts etc. are "not" used.

Because of this limited liability, many investors are interested in investing in these private or public companies. Hence, a large capital can be generated and a huge business can be run.

The major disadvantage of Private and Public companies, is that they have a costly and elaborate process of setting up. They are also closely regulated by the government.

So what are Public or Private companies?These companies are also know as "joint stock companies". The companies in India are governed by the Indian Companies Act, 1956. The Act defines a company as an artificial person created by law, having a separate legal entity, with perpetual succession and a common seal.

What this means is that, the company "is different" from the investors. The investors put in money and capital is raised. But the company is treated as a virtual person. The company is treated as a person who is different from it's investors. The company has an identity of it's own. If some one sues the company, he does not sue the investors, he sues the virtual person that is the company.

To understand the concept of joint stock (private and public limited) companies, consider the following characteristics:

Legal formation:

No single individual or a group of individuals can start a business and call it a joint stock company. A joint stock company can come into existence only when it has been registered after completion of all the legal formalities required by the Indian Companies Act, 1956.

Artificial person:

Just like an individual takes birth, grows, enters into relationships and dies, a joint stock company takes birth, grows, enters into relationships and dies. However, it is called an artificial person as it's birth, existence and death are regulated by law.

Separate legal entity:

Being an artificial person, a joint stock company has its own separate existence independent of it's investors. This means that a joint stock company can own property, enter into contracts and conduct any lawful business in it's "own" name. It can sue and can be sued by others in the court of law. The shareholders are "not" the owners of the property owned by the company. Also, the shareholders cannot be held responsible for any of the acts of the company.

Common seal:

A joint stock company has a "seal", which is used while dealing with others or entering into contracts with outsiders. It is called a common seal as it can be used by any officer at any level of the organization working on behalf of the company. Any document, on which the company's seal is put and is duly signed by any official of the company, becomes binding on the company.

For example, a purchase manager may enter into a contract for buying raw materials from a supplier. Once the contract paper is sealed and signed by the purchase manager, it becomes valid. The purchase manager may leave the company or may be removed from his job or may have taken a wrong decision, yet, the contract is valid till a new contract is made or the existing contract expires.

Perpetual existence:

A joint stock company continues to exist as long as it fulfills the requirements of law. It is not affected by the death, lunacy, insolvency or retirement of any of it's investors. For example, in case of a private limited company having four members, if all of them die in an accident, the company will "not" be closed. It will continue to exist. The shares of the company will be transferred to the legal heirs of the members.

Limited liability:

In a joint stock company, the liability of a member is limited to the amount he has invested. While repaying debts, for example, if a person has invested only Rs.10,000 then only this amount that he has invested can be used for the payment of debts. That is, even if there is liquidation of the company, the personal property of the investor can not be used to pay the debts and he will lose his investment worth Rs.10,000.

Democratic management:

Joint stock companies have democratic management and control. Since in joint stock companies there are thousands and thousands of investors, all of them cannot participate in the affairs of management of the company. Normally, the investors elect representatives from among themselves known as 'Directors' to manage the affairs of the company.

The above discription must have given you an idea about public and private limited companies in general. There are some special charecterstics of Public and Private limited companies that must be understood. There are given below.

Special charecerestics of Private Limited ComapniesThese companies can be formed by at least two individuals having minimum paid-up capital of not less than Rupees 1 lakh.

As per the Companies Act, 1956 the total membership of these companies cannot exceed 50.

The shares allotted to it's members are also not freely transferable between them.

These companies are not allowed to raise money from the pub-lic through open invitation.

They are required to use "Private Limited" after their names.

The examples of such companies are Combined Marketing Services Private Limited, Indian Publishers and Distributors Private Limited etc.

Special charectersetics of Public Lmited CompaniesA minimum of seven members are required to form a public limited company.

It must have minimum paid-up capital of Rs 5 lakhs.

There is no restriction on maximum number of members.

The shares allotted to the members are freely transferable.

These companies can raise funds from general public through open invitations by selling its shares or accepting fixed deposits.

These companies are required to write either 'public limited' or 'limited' after their names.

Examples of such companies are Hyundai Motors India Limited, Jhandu Pharmaceuticals Limited etc.