Business Studies Collins Revision Guide. - StudyGuide.PK

OWNERSHIP AND CONTROL (3)Limited companies●●●●●●●There are two types of limited companies:■ Private limited companies (Ltd)■ Public limited companies (Plc).The most important difference between private and public limitedcompanies is that shares in private limited companies cannot besold to the general public.Limited companies get their capital by issuing shares. For each sharebought there is an equal amount of ownership, an equal amount ofsay in the running of the business and an equal share in any profits.Limited companies have limited liability. This means that if thebusiness has debts, the owners are only responsible for the amountof capital that they put into the business (the amount of moneythat they paid for the shares that they bought).The business has legal entity which means that it exists in its ownright. There is a lot of legal documentation required by businessesbefore they can be set up. This includes registering the businesswith the Registrar of Companies and drawing up a Memorandum ofAssociation. A Memorandum of Association must include the typeof limited company, name, address, purpose of the company andamount of capital to be raised.A public limited company is able to sell shares on the stockexchange. This means it has access to much more capital.The person originally setting up the limited company can losecontrol of the business because there is a divorce of ownershipand control. The owners appoint directors who appoint managersall of whom may have different aims for the business.3