1. Learning Objectives By the end of the lesson you will be able to….
Describe the legal formation of a limited company
Explain the characteristics of a Limited companies and specifically LTD’s
Discuss advantages & disadvantages of LTD’s

2. Limited Companies Limited Companies Private Limited Company (LTD)
Public Limited
(PLC)

3. What do we know about Limited Companies already?
Possible Conflict
Limited liability
Private Limited
Company’s
Owned by Shareholders
Controlled by
Board of Directors
Run by Managers

4. Key points about companies
Owned by shareholders
Run by Board of Directors – elected by shareholders
Each company has its own identity in law (INCORPORATED)
The company employs staff, not the owner(s).
The company owns assets, not the owner(s).
The company operates until it is formally wound up or goes into liquidation.
The company pays corporation tax on its profits.
Minimum of £50,000 of share capital required
Limited Liability
Must hold an AGM (Annual General Meeting)
The concept of risk is important as this defines an entrepreneur. Obviously the more a person invests, the greater the risk of loss. It is also useful to emphasis that although owners can keep the profit (or share it between them) they must first pay tax to the Inland Revenue!

5. How does a business apply to become a Limited Company?
If happy
with
documents
Issue a
Certificate of
Incorporation
Text book page 55
Copy Figure 6.5
1. Memorandum of Association
2. Articles of Association
3. Certificate of Trading
Apply to:
Registrar Of Companies
Complete 2
documents
Send to
Registrar of
Companies
The
Business
1 Memorandum
Of Association
2. Articles of
Association

6. Activity Download and complete fill-in sheet on Moodle
Lesson 15 Limited Companies & LTD’s Fill-in Sheet

7. Private limited companies
Limited liability
Easy to set up/affairs still private
Easier to raise capital/borrow from bank
Share transfers need agreement of all
Death of shareholder has no effect on company
Cannot sell shares to the public
More regulations to comply with
Accounting procedures may be more costly
Benefits
Drawbacks
The point should be made that the directors and shareholders are usually the same people, so this form of ownership is ideal for small family businesses. Accounting procedures will be more costly particularly if the books must be audited, but the type of audit depends upon the turnover. It is useful to stress the company has a separate legal identity – so will keep going until it is formally wound up, regardless of the death of a shareholder.