Limited Companies + Multinationals

• Limited Companies are incorporated. This means that they have a seperate legal identity from their owners.
• Features of Limited Companies :

  • 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 a company. They also get paid from dividend paid from profits, more shares = more money in dividends.
  • The shareholders elect directors to run the company.
  • Sole traders and Partnerships pay income tax, limted companies pay corporation tax on profits.
• Forming a Limited Company :

  A limited company must have a minimum of two members, there is no upper limit.

  • Some important documents must be sent to the Registar of Companies before a limted company can be formed. The two most important are the memorandum of association and the articles of association.
• Private Limited Companies →

  Most private limited companies tend to be small or medium-sized. Here are some features :

  • Their business name ends in Limited or Ltd.
  • Shares can only be transferred ‘privately’ (from one individual to another). All shareholders must agree on the transfer and they cannot be advertised for sale, they also can not trade on the stock market.
  • They are often family businesses, or owned by close friends.
  • The directors of these firms tend to be shareholders and are involved in running the business.
• private limited companies → a private company limited by its shares, it is an incorporated business with limited liability.
• Public Limted Companies →

  Most PLC’s tend to be larger than private limted companies. Their sales can be bought and sole by the public on the stock exchange. Any person or organisation can buy a share.

  • Going ‘public’ is also incredibly expensive.
• public limited companies → a public company whose shares are sold and traded freely to the public. It is also an incorporated business with limited liability.
• Multinational companies → a large business with significant production or service operations in at least two different countries.
• What are the features of multinationals?

  • Highly influential both economically and politically - they can be very powerful and even influence government decision making.
  • Very efficient since they can exploit huge economies of scale
  • Ownership and control is centered in the host country - the control of the company is always held where it was first established, profits are always returned here.
• Advantages of Ltds:

  • Shareholders have limited liability.
  • More capital can be raised.
  • Control can not be lost to outsiders.
  • Has a high status.
• Disadvantages of Ltds:

  • Financial information has to be made public.
  • Costs money and takes time to set up.
  • Profits are shared between members.
  • Can not raise huge amounts of many.
• Advantages of PLCs :

  • Large amounts of capital can be raised.
  • Shareholders have limited liability.
  • PLCs can exploit economies of scale.
  • Can dominate the market.
  • Shares can be bought and sole very easily.
• Disadvantages of PLCs :

  • Setting up costs can be very expensive.
  • Outsiders can take control by buying more shares.
  • Financial information is made public.
  • May be more remote from customers.
  • Managers may take control more than owners.