1.4: Limited companies and multinationals

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Business

11th

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21 Terms

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limited companies
incorporated companies with a separate legal identity from their owners
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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
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minimum number of members required for limited companies
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documents needed to form a limited company
* memorandum of association
* articles of association
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who must the documents needed to form a limited company be sent to
registrar of companies
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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
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memorandum of association
sets out constitution and gives details about the company
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articles of association
deals with the internal running of the country
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are private limited companies small or large
most are small or medium sized, but a small minority is large
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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
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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
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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
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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
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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
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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
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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
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prospectus
a document advertising the company to potential investors
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multinational company
large businesses with significant production or service operation in a minimum of 2 countries
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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
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small businesses
* private limited companies
* family businesses
* shared ownership
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large businesses
* public limited companies
* multinationals