If a business wishes to expand further it can become a PRIVATE LIMITED COMPANY.(LTD) The business sells shares to raise money. The shareholders who buy those shares own the business. They appoint a Board of Directors headed by a Managing Director to run it. The shareholders are given the protection of limited liability which means that if the business goes bankrupt the shareholders will only lose what they put into the business and will not lose their personal possessions A limited company has a separate legal existence from its owners. This means that, if anything goes badly wrong in the business, then the business itself may be sued but not the owners. It also means that the business has continuity; if one of the owners leaves or dies the company can continue.
A limited company must register with the Registrar of Companies. They must produce two main documents:
When these, and one or two other information details have been submitted and a registration fee has been paid the company will be handed its Certificate of Incorporation and will legally exist.
A Private Limited Company can not advertise its shares or sell them on the Stock Exchange. It is a way of a small business getting more money in and protecting its owners by selling shares to family and friends.
The big businesses are PUBLIC LIMITED COMPANIES.(PLC) – Tesco, Marks and Spencer, Barclays etc. These need a minimum start up capital of £50,000 and they can advertise their shares and sell them on the Stock Exchange.
The disadvantages of companies becoming too large however are that: