Limited companies and multinationals Flashcards
what are limited companies
incorporated companies
what are the features of limited companies (5)
owners of limited companies have limited liability
soletraders and partnerships pay income tax whereas limited companies pay corporation tax
business raises capital by selling shares
its run by shareholders who buy shares and run the company by electing a board of directors
how do shareholders run a company
by electing a board of directors, headed by a chairperson, the board of directors is accountable to the shareholders and if the company performs badly, they can be voted out at an annual general meeting AGM
is there a limit of members in a limited companies
a limited company must consist of 2 or more members
what are the legal requirements of forming a limited company
to submit a memorandum of association and articles of association, if these are accepted by the registrar of companies, then they will be given with a certificate of incorporation
what is and does a memorandum of association contain (4)
This sets out the constitution and details about the company and must consist
- name of the company
- name and address of the companies registered office
- objectives of the company and the nature of its activities
- amount of capital to be raised and the number of shares to be issued
what is and does a article of association contain (5)
this document deals with the internal running of the company, must include:
- rights of shareholders depending on the type of shares they hold
- procedures for appointing directors
- length of time directors should serve before the next AGM
- timing and frequency of company meetings
- arrangement for auditing company accounts
what do private limited companies tend to be (4)
- small or medium sized
- Shares can only be transferred privately, all shareholders must agree on the transfer of shares, shares in Private ltd companies cannot be traded on the stock market
- they are often family business, owned by family members or close relatives
- the directors of these firms tend to be shareholders and are involved in the running of the business
what is a private limited company
a company where the individuals who own the business are shareholders, each shareholder with limited liability and protected personal assets
what are the advantages of a private limited company (5)
shareholders have limited liability
business keeps running if a shareholder dies
business cannot be taken over by outsiders as the transfer of all shares must b agreed upon by all shareholders
more capital can be raised
has more status than a soletrader or partnership
what are the disadvantages of a private limited company (5)
financial info has to be made public
more profit dived among shareholders
takes time and money to set up
takes time to transfer shares to new owner
cannot raise huge amounts of money like PLCs
what is a PLC
public limited company, whos shares are freely sold and traded to the public, with a minimum share capital of 50,000 pounds
when private ltds become PLCs, how can it be expensive (6)
- the company needs lawyers to ensure that their prospectus is legally correct
- the prospectus has to be printed and circulated
- all shares must be sold, any unsold shares must be bought by an underwriter who is paid a fee
- advertising and administrative expenses
- the bank may be paid to process applications
- share capital must be above 50k
advantages of PLCs (6)
- large amounts of capital can be raised
- shareholders have limited liability
- PLCs can explot economies of scale
- shares can be sold and bought very easily
- high public profile in the media
-able to dominate the market
disadvantages of PLCs (6)
- may be taken over by outsiders
- setting up costs can be heavily expensive
- more financial info has to be made public
- may be remote from customers
- more regulatoru comtrol owing to company acts
- managers may take control rather than owners
