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Limited Companies
In limited companies, the shareholders
own the company.
There
are two types of limited company – private limited companies (which
use the suffix “Ltd.”) and public limited companies (which use
“PLC”). In private limited companies, shares cannot be sold unless
all the shareholders agree to sell to that particular buyer. In
public limited companies, anyone can buy shares.
Selling
shares in the company raise capital for limited companies. This
type of business carries with it a lot of paperwork, for example
– statuary accounts certificates, correspondence and legal work.
The
shareholders have limited liability. This means that if the business
fails, they only lose the capital that they invested in the company.
Advantages
- Public
limited comapnies have more available capital than partnerships
do.
-
It has a legal position, as a company in it’s own right, not
just a group of partners. (Although, if the business gets in
trouble this could become a disadvantage.)
-
The owners have limited liability.
Disadvantages
- This
type of company is very expensive to set up. Legal and accounting
fees can be especially costly. However, agencies are available
to handle all of the paperwork needed to set up a limited company.
However, for private limited companies, the cost is much less,
and by the time you have claimed back from tax, the cost is
even lower.
-
In private limited companies, shares cannot be normally bought
or sold to the public. The director has to approve of the buyer.
This may limit capital.
-
Careful accounts must be kept. The company is legally obliged
to publish and register its accounts annually. (A PLC must also
have a full audit every year; this obviously adds to costs.
The requirements for public limited company in this area are
much more strict than those for a private limited comapny.)
-
It is just as hard to obtain a loan as if the company was a
partnership.
-
The business is less flexible than the other types of ownership.
Examples
of Limited Companies
- Sainsbury’s
-
Boots
-
Marks and Spencer
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