1.4: Limited companies and multinationals

limited companies

incorporated companies with a separate legal identity from their owners

features of limited companies

* owners have limited liability
* business raises capital by selling shares
* shareholders elect directors to run the company
* pay corporation tax on profit
* legal procedure must be followed

minimum number of members required for limited companies

2

documents needed to form a limited company

* memorandum of association
* articles of association

who must the documents needed to form a limited company be sent to

registrar of companies

if the documents needed to form a limited company are accepted then what will the partners get

certificate of incorporation allowing it to trade as a limited company

memorandum of association

sets out constitution and gives details about the company

articles of association

deals with the internal running of the country

are private limited companies small or large

most are small or medium sized, but a small minority is large

features of private limited companies

* name ends in limited or ltd.
* shares can only be transferred ‘privately’
* shares cannot be traded on the stock market
* often family businesses
* directors tend to be shareholders

private limited companies - advantages

* shareholders have limited liability
* more capital raised
* no loss of control to outsiders
* business continues even if shareholder dies
* has more status

private limited companies - disadvantages

* financial information has to be made public
* costs money
* takes time to set up
* shared profit
* takes time to transfer shares
* cannot raise huge amounts of money

features of public limited companies

* larger than private limited companies
* shares can be bought and sold by public on stock exchange
* anyone can buy shares

why are public limited companies expensive

* company needs lawyers
* prospectus has to be printed and circulated
* bank needs to process applications
* company has to insure against possibility of unsold shares
* advertising and administrative expenses
* must have a minimum 50000 share capital

public limited companies - advantages

* large capital raised
* shareholders have limited liability
* exploit economies of scale
* may be able to dominate the market
* shares bought and sold easily
* high profile

public limited companies - disadvantages

* expensive set up costs
* outsiders can take control by buying shares
* financial information has to be made public
* remote to customers
* regulatory control owing to company acts
* managers take control

prospectus

a document advertising the company to potential investors

multinational company

large businesses with significant production or service operation in a minimum of 2 countries

features of multinational companies

* huge assets and turnover
* highly qualified and experienced professional executives
* powerful advertising and marketing
* advanced and up to date technology
* highly influential
* efficient - exploit economies of scale
* ownership and control is centred in host countries

small businesses

* private limited companies
* family businesses
* shared ownership

large businesses

* public limited companies
* multinationals