May 4, 2012
A joint stock company is when a person gives investors ownership of their business in exchange for capital. This means that the developers of the business receive a smaller share of the company’s profits, while the investors of the business will receive a greater share as their investments are what funded the operation. For example, I person may have an idea to create a new exercise program and build at video exercise business. To build capital for this venture, the entrepreneur may offer partial ownership to would be investors to raise the capital for production and marketing. The investors would then be owners of the business and receive a larger percentage of the profits. A benefit to joint stock companies is the investors assets are protected by limited liability.
Limited liability is protection for investors. When a company fails and goes bankrupt, investors can only lose what they initially invested in the company; unlike unlimited liability, where investors can lose their personal assets as well. In the case of the exercise program, if the idea failed; investors could only lose the capital that was given to start the program such as media materials or advertising costs.
A partnership forms when two or more professionals bring their talents together to collectively run a business. Within a partnership the partners are the sole owner/investors. The creator of the exercise program could partner with others who have other