2.3 Limited companies

• In a limited company, shareholders are personally liable for the company's debts.

  False
• A limited company is legally distinct from its shareholders, allowing it to own property and enter into contracts
• Order the advantages and disadvantages of private and public limited companies:

  1️⃣ Private Limited Company: Simpler structure

  2️⃣ Private Limited Company: Limited capital raising

  3️⃣ Public Limited Company: Access to large capital

  4️⃣ Public Limited Company: Complex regulatory requirements
• The minimum capital requirement for a public limited company in the UK is typically £50,000.


  True
• Professional managers ensure efficient decision-making in limited companies.


  True
• What is a core feature of limited companies regarding ownership and management?

  Separation of ownership and management
• Accountability in limited companies improves transparency through clear lines of responsibility.


  True
• In a limited company, the liability of shareholders is limited to the amount they have invested
• Match the feature of a limited company with its description:

  Limited Liability ↔️ Shareholders are responsible only up to their investment

  Separate Legal Entity ↔️ The company is legally distinct from its owners

  Perpetual Succession ↔️ The company continues regardless of ownership changes
• Perpetual succession ensures a limited company continues to exist even if shareholders change.

  True
• What is the typical minimum capital requirement for a private limited company?

  £1
• Order the steps involved in raising equity finance for a limited company.

  1️⃣ Sell shares to investors

  2️⃣ Initial public offering (IPO) or new shares

  3️⃣ Increase capital

  4️⃣ Potential higher returns
• Equity finance dilutes ownership in a limited company.


  True
• The loss of privacy is a disadvantage of the limited company structure, as certain company information must be publicly disclosed.

  True
• A limited company is a business organization where the liability of shareholders is limited to the amount they have invested
• Match the key features of a limited company with their descriptions:

  Limited Liability ↔️ Shareholders are liable only for their investment

  Separate Legal Entity ↔️ The company is distinct from its shareholders

  Transferable Shares ↔️ Shares can be bought and sold

  Perpetual Succession ↔️ The company continues even if shareholders change
• Shareholders in a limited company are personally responsible for the company's financial obligations.

  False
• Shares in a public limited company are traded on a stock exchange
• The separation of ownership and management in a limited company allows shareholders to focus on investment returns while managers oversee daily operations
• In a limited company, the liability of shareholders is limited to the amount they have invested
• Managers in a limited company ensure efficient and strategic decision-making due to their expertise
• In a large corporation, who oversees daily operations?

  CEO and board of directors
• What does it mean for a limited company to be a separate legal entity?

  Legally distinct from owners
• What is a key aspect of the legal structure of a limited company regarding liability?

  Limited liability
• Private limited companies have shares that are not traded publicly
• The separation of ownership and management allows professional managers to use their expertise in running the company.


  True
• What are common forms of debt finance for limited companies?

  Loans, bonds, debentures
• Tax-deductible interest payments are an advantage of debt finance
• Match the financing option with its characteristic:

  Equity Finance ↔️ Dilutes ownership

  Debt Finance ↔️ No dilution of ownership
• What is a key disadvantage of the limited company structure regarding taxation?

  Double taxation