2. Limited companies
Limited companies are very different from partnerships and
sole proprietorships. In these latter business types, the
owners are the business.
In contrast, limited companies are:
owned by shareholders
run by directors
3. Setting up a limited company
Unlike sole proprietorships and partnerships, which are
simple to set up, limited companies must produce
paperwork and follow certain procedures when setting up.
In addition, a limited company must produce:
a Memorandum of Association, which states who
they are, where they are based and what they do.
an Articles of Association – an internal ‘rulebook’,
which sets out how the business will be run.
All limited companies in the UK have to register
with the Registra of Companies at Companies
House. In return, they are issued with a
Certificate of Incorporation. This is an
official document which shows that the
company has come into existence.
4. Types of limited companies:
Have you ever seen the letters ‘Ltd’ or ‘PLC’ after a
company’s name? Do you know what they stand for?
‘PLC’ after a company’s name tells you it is public limited.
‘Ltd’ or ‘Limited’ after a company’s name tells you it is a
private limited business.
There are two types of limited company:
5. Public limited companies
With a greater number of shareholders, public limited
companies are able to grow at a faster rate than companies
which remain private.
Private limited companies become public by floating their
shares on the stock market, to be bought and sold by the
public. They do this in order to raise capital for expansion.
EX: Large British companies,
like Tesc, Boots, Marks and
Spencer and Barclays are
public limited companies.
• There are many legal formalities to starting a
public limited company
• There is a possibility that the original
owners can lose control of the public
limited company in the issue of a dispute
• Some public limited companies can grow
very large. As a result, many can suffer
from mismanagement and slow decision
9. Private Limited Company
A private limited company is where between
one and ninety nine people come together and
form a business
The owners are called shareholders and they
invest money in the company
The profit is divided up among the
shareholders and distributed in the form of
“Ltd.” is written after the name of the company
The annual accounts are sent to the Registrar
of Companies. They are not published
10. Forming a Private Limited Company
• The people involved in forming a company
are called the promoters
• The promoters employ:
• You need 1 – 99 people who invest money
and are shareholders
– An accountant – for financial advice
– A solicitor – to prepare the legal documents
which must be sent to the Companies
Registration Office (CRO)
11. Forming a Private Limited Company
Memorandum of Association
Articles of Association
12. Advantages of a Private Limited
• Shareholders have limited liability
• Extra capital is available to fund
expansion of the business
• Continuity of existence
13. Disadvantages of a Private
• Costly to set up
• A lot of legal requirements when
forming a company
• Shares cannot be transferred to
the general public
14. Income Tax slab
For Both Pvt. L.td
Co. and Plc. Ltd.
3% Education Cess
If you have a small capital, then
Private Co. is preferable or if you have
a large capital and if you want to have
a large share in the market, you can
form a Public Co.
• Can quote shares in
• Two directors are
needed for PLC.
• Annual accounts must
be filed for every six
• Shares are easily
• Can’t quote shares in
• Only one director is
• Annual accounts must
be filed for every nine
• Shares cannot be