4: Limited Companies and Multinationals  

Features of a Limited Company: 

They are incorporated which means they have a separate legal identity from their owners. They can own resources, form contracts, employ people, sue and be sued.

• The owners have limited liability. If a limited company has debts, the owners can only lose the money they originally invested
• The business raises capital by selling shares. Each shareholder owns a number of these shares
• They are joint owners of the company and they are entitled to vote on important matters and make key decisions
• They also get dividend paid from profits, those with more shares will receive more control and profit
• The shareholders elect directors to run the company. The board of directors headed by a chairperson is accountable to the shareholders
• If the company performs badly, directors can be voted out in the annual general meeting (AGM)
• Companies pay corporation tax on profits

Forming a limited company: 

• Must have a minimum of two members
• Some important documents must be sent to the Registrar of companies
• If documents are acceptable, the company will get a certificate of incorporation, this allows it to trade.

Private limited companies: 

• Tend to be small or medium sized
• Their business name ends in Limited or Ltd
• Shares can only be transferred ‘privately’ and can not be traded in the stock market
• They are often family businesses owned by family or close friends
• The directors tend to be shareholders and are involved in the running of the business

Public limited companies:

• They tend to be larger than private limited companies
• The shares can be bought and sold by the public on the stock exchange
• It is expensive because it needs lawyers to ensure the prospectus is legally correct
• There is advertising and administrative fees as well.

Features of Multinationals: 

It is a large business with significant production or service operations in at least two different countries. Ex: Mcdonalds, and Coca-Cola.

• Huge assets (land, buildings, plant, machinery and money) and turnover, they are extremely well-resourced and can often afford to take on large-scale contracts and projects 
• Highly qualified and experienced professional executives and managers
• Powerful advertising and marketing capability 
• Highly advanced and up-to-date technology
• Highly influential both economically and politically 
• Very efficient since they can exploit huge economies of scale
• Ownership and control is centred in the host country

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