Learning Objectives By the end of the lesson you will be able to…. Describe the legal formation of a limited company Explain the characteristics of a Limited companies and specifically LTD’s Discuss advantages & disadvantages of LTD’s

Limited Companies Limited Companies Private Limited Company (LTD) Public Limited (PLC)

What do we know about Limited Companies already? Possible Conflict Limited liability Private Limited Company’s Owned by Shareholders Controlled by Board of Directors Run by Managers

Key points about companies Owned by shareholders Run by Board of Directors – elected by shareholders Each company has its own identity in law (INCORPORATED) The company employs staff, not the owner(s). The company owns assets, not the owner(s). The company operates until it is formally wound up or goes into liquidation. The company pays corporation tax on its profits. Minimum of £50,000 of share capital required Limited Liability Must hold an AGM (Annual General Meeting) The concept of risk is important as this defines an entrepreneur. Obviously the more a person invests, the greater the risk of loss. It is also useful to emphasis that although owners can keep the profit (or share it between them) they must first pay tax to the Inland Revenue!

How does a business apply to become a Limited Company? If happy with documents Issue a Certificate of Incorporation Text book page 55 Copy Figure 6.5 1. Memorandum of Association 2. Articles of Association 3. Certificate of Trading Apply to: Registrar Of Companies Complete 2 documents Send to Registrar of Companies The Business 1 Memorandum Of Association 2. Articles of Association

Activity Download and complete fill-in sheet on Moodle Lesson 15 Limited Companies & LTD’s Fill-in Sheet

Private limited companies Limited liability Easy to set up/affairs still private Easier to raise capital/borrow from bank Share transfers need agreement of all Death of shareholder has no effect on company Cannot sell shares to the public More regulations to comply with Accounting procedures may be more costly Benefits Drawbacks The point should be made that the directors and shareholders are usually the same people, so this form of ownership is ideal for small family businesses. Accounting procedures will be more costly particularly if the books must be audited, but the type of audit depends upon the turnover. It is useful to stress the company has a separate legal identity – so will keep going until it is formally wound up, regardless of the death of a shareholder.