Understanding Business - Lesson 1 Flashcards
Private Limited Company
An incorporated business with its own seperate legal identity that is owned by shareholders. Run by directors. Shares are NOT traded on a stock exchange.
Public Limited Company
Like a Private LC where its an incorporated business with its own seperate legal identity. Owned by shareholders and run by directors. Shares ARE traded on the stock exchange.
Goodwill
Partnerships build up goodwill over time through loyal customers, a positive reputation or a good product. Intangible asset. Goodwill is the difference between the set value of it’s assets - liabilities and what it’s actually sold for.
Limited Liability Partnership (LLP - SE)
Set up through a processs of legal incorporation, documents submitted to the Registrar of Companies. Members agreement is not legal but advisory to set out the member’s obligations. All LLP’s must have two or more ‘designated members’ responsible that the legal requirements are carried out.
Ltd partnership
Similar to a LLP but it must have at least 1 general partner and one limited partner (different people). Ltd partners have limited liability but the general ptnr will have unlimited liability. General partner responsible for day-to day running. Used for short projects where the lrd partners provide investment for the project in return for a share of the returns.
Two types of LTD companies
Public and private
Who owns ltd companies?
shareholders
Who manages ltd companies?
Directors
When may a ltd company become a public liability company (plc)?
More than £50,000 of issued share capital
At least two members (shareholder)
At least 2 directors
Can shares of a public liability company (plc) be traded on the stock exchange?
Yes
A private ltd company is privaely owned with:
No minimum requirement for issued shared capital
At least one member (shareholder)
At least 1 director who can be the same person as the sole shareholder
What is an incorporated business?
Individuals are NOT LIABLE FOR DEBTS. An incorporated business has a separate legal personality. This detaches itself from the shareholders (owners) and directors (managers). Having a separate legal personality means that individuals are not generally liable for the business’s debts
What is an unincorporated business?
OWNERS ARE RESPONSIBLE FOR LIABILITIES. Unincorporated businesses do not have a separate legal personality. The lack of separation means the owners of the business are responsible (or liable) for its debts.
Advantages of incorporation
Liability for members and shareholders is limited to the amount invested.
Sounds more credible than a sole trader
Access to finance may be easier
Transfer of ownership is easier
Disadvantages of incorporation
Additional costs of setting up the business and extra record keeping.
Info filed on Companies House so made public.
Business finances must be kept entirely separate from the owner unlike a sole trader who can take drawings.
