Main disadvantages or demerits of joint stock company can be expressed as follows:
1. Difficult To Form
It is a complicated process to form and operate joint stock company. Lots of legal formalities, high set-up costs and much time is needed to establish this type of business.
2. Lack of Quick Decision
In joint stick company salaried manager cannot make any decision. Important decisions are taken after the approval of board of directors. Therefore, decision making process is lengthy and prompt action is not possible.
3. No Secrecy
In joint stock company, it is not possible to maintain business secrecy and privacy like sole proprietorship and partnership firms.All the financial data and information become public through financial statements and all the matters are discussed in annual general meeting with the shareholders and other parties.
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Ownership and management are different in joint stock company. All the organizational activities are performed by salaried managers. A company do not provide extra incentive for their work which may lack motivation and personal interest for the growth of the business.
5. High Tax
Joint stock company suffers from higher tax rate than sole trading concern and partnership firm. It has to pay more tax than other types of business.
