3) Private companies | Personal liability company

    avatar
    Created by
    caleb coughlan

    Cards (25)

    • Characteristics of a private company
      • A private company is not allowed to sell shares to the public.
      • The company name ends with letters (Pty) Ltd.
      • The company raises capital by issuing shares to its shareholders.
    • Impact of private companies
      Positives
      • Companies pay tax on a fixed tax rate.
      • It is a legal person and can sign contract in its own name.
      • There is the potential of good long-term growth.
    • Impact of private companies
      Negatives
      • A lot of capital is required to start a company.
      • Companies must prepare annual financial statements.
      • Must adhere to the tax requirements of the government.
    • Criteria that contribute to the success and/ or failure of a private company
      Taxation
      Success
      • The company pays tax at a fixed rate on its profit.
      • Can obtain tax rebates if they are involved in CSI projects.
      Failure
      • Companies are subject to double, for example, shareholders pay the secondary tax which could discourage investors from buying shares in the company.
    • Criteria that contribute to the success and/ or failure of a private company
      Management
      Success
      • Managed by at least one competent highly skilled director.
      • Shareholders can vote for/ appoint the most capable directors to manage the company.
      Failure
      • Directors' fees increase the company's expenses which reduces net profit.
      • Large management structures can result in decision-making taking time.
    • Criteria that contribute to the success and/ or failure of a private company
      Capital
      Success
      • More capital can be raised by issuing more shares to shareholders.
      • Large amounts of capital can be raised since there is no limit on the number of shareholders.
      Failure
      • It cannot grow into a very large business since it cannot invite the public to buy shares.
      • Restrictions on the transferability of shares may not attract financially strong investors.
    • Criteria that contribute to the success and/ or failure of a private company
      Division of profits
      Success
      • Profits generated can be re-invested to expand business operations.
      • Shareholders receive profits according to the number of their shares.
      Failure
      • Dividends are not always paid out, which may discourage new investors.
    • Criteria that contribute to the success and/ or failure of a private company
      Legislation
      Success
      • Limited liability allows for greater risk-taking, which may lead to the growth of the business.
      • There is no longer a limit on the number of shareholders in a private company.
      Failure
      • High formation/ establishment expenses require large start-up capital.
      • Annual audit of financial statements (if required) is costly.
    • Characteristics of a personal liability company
      • The company name must end with the letter INC.
      • The company must have at least one director on its board of directors.
      • The Memorandum of Incorporation should state that it is a personal liability company.
    • Criteria that contribute to the success and/ or failure of a personal liability company
      Taxation
      Success
      • Can obtain tax rebates if they are involved in CSI projects.
      • Can obtain government tenders and renew their licenses if they do not evade tax.
      Failure
      • Subject to double taxation, for example, when shareholders pay secondary tax it can harm a company that is already struggling financially.
    • Criteria that contribute to the success and/ or failure of a personal liability company
      Management
      Success
      • More directors may be appointed to bring more skills or expertise to the PLC.
      • Shareholders can vote for and appoint the most capable directors to manage their company.
      Failure
      • Directors' fees increase the company's expenses, which reduces net profit.
      • Directors may not have a direct interest in the company, which can hamper growth and profit maximisation.
    • Criteria that contribute to the success and/ or failure of a personal liability company
      Capital
      Success
      • Capital can be increased by getting more shareholders.
      Failure
      • It cannot grow into a very large business since it cannot invite the public to buy shares.
      • Restrictions on the transferability of shares may not attract financially strong investors.
    • Criteria that contribute to the success and/ or failure of a personal liability company
      Division of profits
      Success
      • High profits and good returns to shareholders indicate the success of a company, which increases the value of shares.
      Failure
      • Shareholders may sell their shares when dividends are low, resulting in a drop in share prices.
    • Criteria that contribute to the success and/ or failure of a personal liability company
      Legislation
      Success
      • The company and its owners (shareholders) are separate entities, which may encourage more people to join the company.
      Failure
      • Lengthy registration requirements may delay the actual operation of the business and shareholders can lose out on profitable opportunities.
    • Criteria that contribute to the success and/ or failure of a personal liability company
      Legislation
      Success
      • Directors sign performance contracts that will motivate them to perform professionally and ethically.
      • May obtain government tenders as the PLC is properly registered in compliance with the Companies Act.
      Failure
      • The drafting of directors' performance contracts may be time-consuming, expensive, and increase costs.
    • Characteristics of a public company
      • The company name ends with the letters/ abbreviation Ltd.
      • The shareholders of a company have limited liability.
      • The company has a legal personality and unlimited continuity.
    • Impact of public companies
      Positives
      • The business has its own legal identity.
      • Companies may buy and sell shares freely.
      • Shareholders can sell/ transfer their shares freely.
    • Impact of public companies
      Negatives
      • Stocks have to be traded publicly.
      • The more shareholders, the fewer dividends to each shareholder.
      • Due to legislation, decisions take longer and there may be disagreements.
    • Criteria that contribute to the success and/ or failure of a public company
      Taxation
      Success
      • Can obtain tax rebates if they are involved in CSI projects.
      • The company pays tax at a fixed rate on its profit.
      Failure
      • Subject to double taxation, for example, if shareholders have to pay the secondary tax this can harm a company that is already struggling financially.
    • Criteria that contribute to the success and/ or failure of a public company
      Management
      Success
      • The management of the company can improve since directors are accountable to shareholders.
      • Directors bring creative ideas, which encourages efficiency in the company.
      Failure
      • A large management structure can result in timeous decision making.
      • Directors fees increase the company's expenses and reduce net profit.
    • Criteria that contribute to the success and/ or failure of a public company
      Capital
      Success
      • Can raise large amount of capital as shares and debentures can be sold to the public.
      • The share capital clause in the Memorandum of Incorporation (MOI) may be changed to issue more shares.
      Failure
      • Growth is limited if sufficient capital cannot be raised.
      • Large amount of capital are required to start a public company
    • Criteria that contribute to the success and/ or failure of a public company
      Division of profits
      Success
      • Shareholders receive profits according to the type and number of their shares.
      • Profits generated can be re-invested to expand business operations.
      Failures
      • Dividends are not always paid out, which may discourage new investors.
    • Criteria that contribute to the success and/ or failure of a public company
      Legislation
      Success
      • Companies must comply with the Companies Act, No. 71 of 2008.
      • Limited liability allows for greater risk-taking, which may lead to the growth of the business.
      Failure
      • Annual audit of financial statements is costly.
      • High formation/ establishment expenses require large start-up capital.
    • Differences between the private and public company
      Private company
      • May not offer shares to the general public.
      • Shares are not freely transferable.
      • Minimum of one director
    • Differences between the private and public company
      Private company
      • Listed companies may trade its shares publicly on the Johannesburg Security Exchange (JSE).
      • Shares are freely transferable.
      • Minimum of three directors.