6. Law: Private & Public Limited Companies | Formation of a Company with Public or Private Limited Liability | Corporation Tax Flashcards
(42 cards)
What minimum positions are needed for a Ltd Company?
A private Ltd Company only requires one member
Ltd Company needs a designated director (16yrs) & shareholder
What is the minimum number of shareholders needed for a LTD?
one shareholder
When you setup a Limited Company what must you ensure you do with the name of the company?
you must use “Limited” or “Ltd” at the end
How long should the copies of the accounts for a LTD be kept for?
six years from when they were first made
What are the five main advantages of a Ltd Company?
limited liability
tax savings
investment capital
professional image
formation of legal contracts
Discuss “Limited Liability” as an advantage for a Ltd Company
financially - members are only responsible for any debt equal to the amount of capital they initially invested
legally - legally protected from being sued
legally - legally protected from being responsible for negligence or misconduct of any other members
Discuss 2 points for “tax savings” as an advantage for a Ltd Company
tax reduction - a Ltd Company pays a lower corporation tax (19%) vs income tax (20-45%)
tax flexibility - in choice to reinvest profits back into business
Discuss “formation of legal contracts” as an advantage for a Ltd Company
a Limited Company is a legal “person” in its own right
its a totally separate entity from its members
companies can therefore enter into legal contracts in their own name without bringing any liability to the members
Discuss 3 points “investment capital” as an advantage for a Ltd Company
a Ltd Company can sell shares to raise investment capital
banks are more likely to loan capital to incorporated businesses
it’s easier to get investment capital as a Ltd Company without members having to put their own assets at risk
Discuss “professional image” as an advantage for a Ltd Company
incorporated companies adds credibility to the business
other larger companies are more likely to do business
What are 7 disadvantages of a Ltd Company
formation - more regulated
admin - more complex tasks
accounting - higher accountancy fees
privacy - director personal information & company financials are available to public
decision speed - ability to make & implement decisions is slower
control - shareholders
money - shared
What is the main difference between a Public Limited Company & a Private Limited Company?
A PLC can offer its shares for sale to the public on the stock exchange if it wants to
What is it called when a PLC sells its shares on the stock market?
floating on the stock exchange
What happens if a LTD offers its shares for sale to the public on the stock exchange?
If it sells £50,000 value of shares it converts to a PLC
A PLC can also become a LTD if it reduces the shares on offer to the public to below £50,000
What is the minimum value of shares that a PLC must offer the public before it can trade?
£50,000 (Euro equivalent)
What are the minimum positions needed for a PLC?
2 x directors (16yrs)
2 x shareholders
1 x chartered/qualified secretary
When you setup a Public Limited Company what must you ensure you do with the name of the company?
you must use “Public Limited Company” or “PLC” at the end
Can a PLC have two corporate directors without an individual director?
a PLC must always have one “individual” director
What is the difference in decisions made by shareholders vs board of directors in a limited company?
the shareholders make decisions as owners
the board of directors make decisions as managers
Can shareholders be other companies or do they have to be individuals?
shareholders can be companies
How often must an external auditor audit a PLCs accounts & why is an external auditor needed?
once per year
to show the true financial position of the company to the shareholders
How long should the copies of the accounts for a PLC be kept for?
six years from when they were first made
What is the main advantage of a PLC?
to be able to raise capital by selling shares of the company to the public on the stock market
What are three the main disadvantages of a PLC?
need a minimum of £50,000
more complexity in accounting & admin
risk of hostile takeover from competitors because PLC cannot control or buys their shares
