Save
...
Understanding business
Types of business organisation
Limited companies
Save
Share
Learn
Content
Leaderboard
Learn
Created by
Zainab kaman
Visit profile
Cards (7)
Private Limited Companies
Owned by
shareholders
, who have
one
or
more
shares in the business.
Shareholders have limited liability.
Shares are sold
privately
to
investors
who are already known to the business.
Aim to
maximise
profits
,
grow
and
increase
market
share
Controlled by a
Board
of
Directors
who are managed by a
managing
director.
Have to produce documents called the Memosadum of Association and Articles of Association.
Limited
Liability
The owners
personal
positions are not at risk if the business gets into
debts
, as they only lose their
investment
in the company.
Advantages of private limited company
Shareholders
have
limited liability
.
Capital
can be
raised
by selling
shares
.
They do not have to
disclose
most the information the public limited companies have to provide.
Ownership aren't lost to outsiders as all shareholders are known.
Disadvantages of private limited company
Profits
have to be split with
shareholders
by issuing
dividends.
Legal
process required to set up the company.
Shares
cannot be sold quickly
Publicly
on the Stock Exchange, so there is limited source of
capital
available.
Financial accounts can't be kept
private
as they must be
shared
with the Companies House and are therefore made
publicly
available.
Public Limited Company
Owned by
shareholders
who have
limited liability.
Must have a minimum of
£50,000 share capital
(usually a large company).
Controlled by a
Board of Directors.
Can sell their shares through the
stock market.
They aim to dominate the
market
, increase
market
share and
market value.
Advantages of Public Limited Company
Shareholders
have
limited liability.
Large amounts of finance can be easily raised through the
public
sale of
share.
Banks
are very willing to lend PLC's money due to their
size
and reputation, as they are seen less risky.
Organisation has financial
stability
, enabling it to develop and
expand.
Disadvantages of Public Limited Company
Dividends are shared with many shareholders.
Control of the business can be lost if anyone can buy shares of the stock market.
Annual account have to be published.
Setting up a PLC can be costly and complicated.
Employees can feel alienated from those at top.
They can grow so large that they cannot be managed affectively.