Evaluate private limited company as a form of business organisation.

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  • Created by: jerd
  • Created on: 10-05-23 19:46

Evaluate private limited company as a form of business organisation.

Advantages

  • raising capital - no limit to no. of shareholders + company can raise finance through sales of shares
  • limited liability - not personally liable for the companies debts
  • continuity - company is unlikely to impacted by death of shareholders as shares can be rescinded or re-issued to other
  • specialisation - greater no. of director who may specialise in areas which they have a comparative skills advantage
  • control - shareholders kept to minimum due to inability to sell shares publicly, company also protected from hostile takeovers (cannot be sold without consent of shareholders)

Disadvantages

  • lack of privacy - Ltd's required to submit financial statements to the Registrar of Companies (can be inspected by general public, interested parties + consumers)
  • set up costs - time consuming + costly (solicitors fees are high in order to deal with official legal procedures)
  • taxation - directors pay income tax, national insurance contributions + pension costs on salaries + dividends
  • restrictions on raising capital - can't sell shares on stock exchange + some banks see Ltd's status as a risk + refuse to offer loans

Evaluation

- ltd after its name  - owners called shareholders  - separate legal existence from owners (separate legal identity  - legal process required  - controlled by a Board of Directors (usually family + friends)  - run by a Managing director

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