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  • Business Ownership- continued
    • Private limited company
      • The business has a separate legal entity from its owners (it can own property in the name of the company; it can sue and be sued)
      • The company is owned by shareholders who invest their own money in the business.
      • These shareholders are usually family and friends.
      • These shareholders are usually family and friends.
      • The shareholders receive dividends (a share of the profit) from the business.
      • The shareholders receive dividends (a share of the profit) from the business.
      • The business is run by a Board of Directors, which in many LTDs is made up of the shareholders
      • To become an LTD the shareholders/directors must complete 2 documents:Memorandum of Association – sets up the companyArticles of Association – states how the company is to be run
      • Benefits
        • Limited liability
        • Shared responsibility
        • Financial information stays private
      • Drawbacks
        • Any new shareholders must be agreed with all other shareholders, so future sources of finance through shares can be difficult to raise
        • Decision-making amongst all shareholders (as directors) can take a long time
    • Public Limited Company (PLC)
      • The business has a separate legal entity from its owners (it can own property in the name of the company; it can sue and be sued)
      • The company is owned by shareholders
      • Shares can be bought and sold on the stock market
      • There must be at least £50,000 in share capital to become a PLC
      • The shareholders receive dividends (a share of the profit) from the business.
      • There must be at least 2 shareholders (but usually there are many thousands
      • The business is run by a Board of Directors who are elected by the shareholders
      • To become a PLC the company must complete several documents:Memorandum of Association – sets up the companyArticles of Association – states how the company is to be runProspectus for potential shareholders to read
      • Benefits
        • Limited liability
        • Large amounts of capital can be raised through issuing more shares
        • High profile business (well known)
      • Drawbacks
        • Financial accounts must be available for the public to view.
        • Legal process to become a PLC is lengthy and costly
        • Original owners are unlikely to retain control over decision making
        • Greater risk of take-over

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