BM Unit 1 - LO1 1

Limited Companies

DEFINITION - Owned by shareholders and commonly run on a day-to-day basis by paid employees (Board of Directors)

PUBLIC LIMITED COMPANIES (PLC) – Can sell shares to the general public on the Stock Exchange

PRIVATE LIMITED COMPANIES (Ltd) – Can only sell shares to individuals on the agreement of all existing shareholders (no more than 50 shareholders)

BM Unit 1 - LO1 2

How to Set up a Limited CompanyREGISTER – with Companies Registrar

LEGAL DOCUMENTS – Prepare the Memorandum of Association and Articles of Association which lays out rules and objectives of company

LIMITED LIABILITY – company has a separate legal identity and shareholders cannot be forced to pay company debts if it fails

DIVIDENDS – Share of profits paid to shareholders on the basis of number of shares owned

BM Unit 1 - LO1 3

Private Limited Companies (Ltd)

Shareholders have limited liability responsibilities

Still a measure of privacy - Ltds do not need to publish their annual accounts.

Need to disclose some financial information than Bigger organisations are difficult to manage More difficult to keep staff motivated Set up costs and running costs (e.g.

accountants to complete PAYE returns)

BM Unit 1 - LO1 4

Public Limited Companies (PLCs)

Shareholders have limited liability responsibilities

Shareholders can re-sell shares on Stock Market if they need to raise cash

PLCs can raise money for new projects easily Need to disclose financial information Bigger organisations are more difficult to

manage than partnership or sole trader More difficult to keep staff motivated if they feel

distant from Board of Directors Legal set up costs most expensive of all

business organisations

Multinationals Receive tax concessions Lower wage costs Legislation may help cheaper production costs Lower taxation rates May be political unrest or a weak currency May be lack of expertise

Large businesses who produce in different countries

● Legislation in local country may to too restrictive● Weak currency which doesn’t allow profits to be converted back

at a good rate● Lack of technical expertise or equipment or infrastructure● Cultural differences – make products unpopular for both

production and sale● Politically unstable

Why not to locate abroad….

BM Unit 1 - LO1 6

Voluntary Sector

DEFINITION – Exist to raise money for good causes or to provide a service which would otherwise be left unsatisfied

Must be registered with the Charity Commissioners who oversee their activities

Examples? Oxfam Local football team