A joint-stock company is a form of company that acquires legal personality from the date of its incorporation and is commonly used to run companies. The company's share capital consists of the total contributions of its shareholders. Shares can be traded publicly, which provides an incentive for investors needed for further business development. At the time the company is incorporated, shareholders can declare it a closed company, meaning shares can be transferred to anyone, but current shareholders must have a right of first refusal. At the time of incorporation, shares may be issued in a variety of forms, including bearer shares, registered shares, or preferred shares.

Functions of a joint-stock company
The ultimate goal of all businesses is to run a business and make a profit. A joint-stock company is a useful form of company for attracting investors and additional funding, in return for which the investor receives shares that give the right to dividends. Stock corporations often develop into large corporations. They are most common in the financial services sector - credit institutions, banks, insurance companies and other payment and financial institutions are very often public companies. Of course, these companies need financial stability and sufficient funds in case of need.

Advantages and disadvantages of a joint-stock company
The advantage of this kind of company formation relates to liability thresholds. As a general principle, shareholders in a joint-stock company are liable only up to the value of their contribution to the company. So, if the company becomes insolvent, the creditors cannot seek compensation or require damages from the shareholders personally. Conversely, the company is not liable for its shareholders` debts. The strict line between the shareholders` and the company`s liabilities is based on the principle of the legal person.

Another advantage is the ability to raise the necessary funds for starting up the business. At the startup stage, it can be difficult for a company to obtain the initial capital. However, when a few business partners make an investment to achieve a single goal, the business startup plans are likely to be more realistic. Meanwhile, common investment is directly related to common profit-sharing. So if the company makes a profit, dividends should be paid proportionally to each shareholder.

The functions and competence of a company management board is governed by the applicable commercial law and the company’s articles of association. A joint-stock company usually involves a two-level supervisory board, and while this helps control decision making in the daily course of business and avoid mistakes, a complicated management structure may impair the speed of decision making at times when a quick reaction is necessary.

If you plan on setting up a business in the form of a joint-stock company, we strongly recommend that you consult us first. We can provide you with full, detailed information regarding tax planning options and the most efficient corporate structure for your business.