Limited Companies Mrs Reid

Learning Objectives –Identify the key feature of Limited Companies –Define limited liability and incorporation –Explain the process involved in setting up a Ltd and Plc by completing a memorandum of association and articles of association for a business –Identify the issues associated with divorce of ownership –Compare the relative benefits of private sector ownership for a small business

Key terms ‘Limited’ and ‘Company’ LIMITED refers to the ‘liability’ of the owners of a business in this case they will not lose any personal possessions if the company gets into debt. –Unlimited Liability – Sole traders; Ordinary Partnerships –Limited Liability – Private & Public Limited Companies COMPANY refers to the separate legal identity of the business through ‘incorporation’

Key terms ‘Shareholders’ and ‘Shares’ A SHAREHOLDER is the owner of a limited company. If you have SHARES in a company you are entitled to a share of its profit at the end of the year also known as a dividend.

Features of Limited Companies A separate legal existence from owners Controlled by a Board of Directors Run by a Managing Director To set up a company the owners must register the company at Companies House and complete the following two legal documents: –Memorandum of Association (outlines companies purpose and its shareholders)Memorandum of Association –Articles of Association (regulations which relate to the internal relationships between shareholders and directors)Articles of Association Once the incorporation process is complete: –Certificate of Incorporation issued by Companies HouseCompanies House –Each year company accounts must be sent to registrar and all shareholders –Annual meeting for all shareholders (AGM)

There are two types of companies Private Limited Companies and Public Limited Companies. You will now work in groups to produce a leaflet explaining each type, you have 30 minutes.

Private Limited Company (Ltd) Key Features Ltd after it’s name Owners called shareholders The more shares an individual owns the greater their extent of ownership Shareholders who are family and friends( Not listed on stock market ‘Private’ sale of shares) A Private Limited Company is in the Private Sector

Private Limited Company (Ltd) Advantages Limited liability Greater availability of finance Shares sold to family and friends Specialisation can occur Disadvantages More complicated to set up - legal formalities Loss of individual control

Public Limited Company (plc) Key Features plc after it’s name Owners called shareholders More than £50k of share capital Listed on stock market – no control of who purchases shares Shareholders who are members of the general public A Public Limited Company is in the Private Sector Independent Study opportunity – ‘Flotation’. Also why did Branson change Virgin from a Plc back to a Ltd?

Public Limited Company (Ltd) Advantages Limited liability Greater availability of finance Specialisation can occur Disadvantages More complicated to set up - legal formalities Loss of individual control Greater threat of takeover Shares sold to general public