business
- Created by: katier1234
- Created on: 12-11-19 16:44
View mindmap
- 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
- Private limited company
Comments
Report