Limited Company Flashcards
Define limited company
A limited company is a legal entity which has a separate identify from it’d share holders whose liability for the company’s debts is limited
What is Limited liability
Liability of shareholder is limited to their capital contritions in the company
AdVantages of limited companies
-better access to capital
-separate legal identity
-limited liability
Disadvantages of limited companies
-costly setup
-public disclosure of accounts
-limited Rolfe of shareholders in management
What’s shares
The capital of a company divided into units
How are profits distributed among members
Profits are distributed among the members in the form of dividends
What are the two types of limited companies
-private limited company
-public limited company
LI’m uu what does a public limited company offer
They offer shares to the public
What does a private limited company offer
A smaller company and is not allowed to the offer it’s shares to the public
What is the main benefit of being a meme nee of a limited cocmpany from the viewpoint of an individual
-the lability of the debts of the company is limited to the amount the em member agreed to contribute
-separate legal entity to its shareholders so legal actions are taken against the company not the individual shareholders
-easy to buy and sell shares
What is the main benefit of being a meme nee of a limited cocmpany from the viewpoint of a business
-access greater capital than is possible for a sole trader or partnership business
-loans can often be obtained more easily by a limited company than by a sole trader or a partnership business
define issued shared capital
is the amount of capital issued to the shareholders
Define called up capital
the part of the issued share capital for which payment has been requested from shareholders
Define paid up capital
Paid up capital is that part of the called up share capital for which the company has received payment from shareholders
What are the types of shares
-preference shares
-ordinary shares
What is a preference shares
-they receive a fixed rate of dividend which is a payable before any dividend is payable to the ordinary shareholders.
-the dividend is the same every year
-if a company is wound up any money left after paying outside liabilities is used to pay back the preference shareholders before anything is returned to the ordinary shareholders.
-preference shareholders are not usually entitled to vote at the shareholders meeting
What is redeemable preference shares
-the dividend is included as a finance cost in the profit and loss section of the income statement
-the preference shares are shown as non current liability in the statement of financial position
What is non-redeemable preference shares
-the dividend paid is included in the statement of changes in equity and the preference shares are included in the equity and reserves sections of the statement of financial position
What is a ordinary share
-the dividend on ordinary shares is only payable after that on the preference shares has been accounted for.
-the dividend is not a fixed amount,but can vary according to the profits of the company
-if the trading results are poor the ordinary shareholders may receive no dividend all all.
-ordinary shareholders are usually entitled to vote at shareholders meetings on the basis of one vote per share
State differences between preferences shares and ordinary shares
preference shares -
-carry a fixed rate of dividend
-dividend is paid before ordinary share dividend
-do not usually carry voting rights
-capital is repaid before ordinary shares in a winding up
ordinary shares -
-carry a variable rate of dividend
-dividend depends on profit
-carry voting rights
-are last to be repaid in a winding up
-are members of the company
Define debentures
a debenture is a long term loan which has a fixed rate of interest,payable irrespective of the profit of the company
