Legal Structures (LTD and PLC) Flashcards
What is a private limited company?
a small to medium-sized
business that is owned by shareholders who are often
members of the same family; this company cannot sell
shares to the general public.
What is a public limited company?
a limited company, often a large
business, with the legal right to sell shares to the general
public – share prices are quoted on the national stock
exchange.
Advantages of a LTD?
Limited liability Separate legal continuities Continuity Greater sucess Able to raise capital from sales of shares to family, friends and employees
Disadvantages of a LTD?
Legal formalities involved in establishing the business
Shares can’t be sold to he general public
Difficult for shareholders to sell shares
End of year accounts available to the public
Advantages of a PLC?
Easy to buy and sell shares
Access to substantial capital
Benefits from economies of scale
Lower unit costs
Disadvantages of a PLC?
Risk of take over
Costs associated with starting the business
Share prices are subject to change
Directors have to follow the objectives of major shareholders
Conflicts of interest between shareholders and board of directors
What is a Memorandum of association?
this states the name of the
company, the address of the head of ice through which it
can be contacted, the maximum share capital for which the
company seeks authorisation and the declared aims of the
business
What is a Franchise?
a business that uses the name. logo and trading systems of an existing successful business. (side note: this is is a legal contract not a structure)
Advantages of a Franchise
Established product= less chances of failure
Advice and training offered by the franchiser
Franchiser agrees not to open another branch in the local area
Supplies obtained from established and quality checked suppliers
Disadvantages of Franchises
Share of profits or revenue has to be paid to franchiser each year
Initial franchisee licensing fee can be expensive
