Question

“Rita and Sita established a joint stock company to manufacture and sell toys.” Identify this form of business organization. Explain any five features of this form of business organization.

Answer 1

This form of business organisation is a Joint Stock Company. Its features include:
1. Separate Legal Entity: The company is distinct from its owners and can enter contracts, sue, or be sued in its name.
2. Limited Liability: Shareholders are liable only up to the unpaid value of their shares.
3. Perpetual Succession: The company continues to exist even if its members change or pass away.
4. Transferability of Shares: Shares can be easily transferred, providing liquidity to shareholders.
5. Large Capital Base: The company can raise significant funds by issuing shares to the public.
Example: Rita and Sita can raise funds through shares to expand their toy manufacturing business.