Business ownership - AQAPrivate limited companies (ltd)
There are a number of options for the ownership of a business. Each ownership type has its own advantages and disadvantages and a business should choose the one that best suits its needs.
A private limited company can be a small or large business. A private limited company has Limited liability When the business owner or owners are only responsible for business debts up to the value of their financial investment in the business. and often these types of business have ‘Ltd’ after the business name. An example of this would be ‘Green Construction Ltd’. Any type of business can set up as a private limited company – for example, a plumber, hairdresser, photographer, lawyer, dentist, accountant or driving instructor.
The owners of a private limited company are known as shareholdersA part owner of a private or public limited company.. Shareholders have to be invited by the business before they can purchase a sharesA percentage or portion of a company. of the business. A share is a portion or percentage of a company.
Private limited companies pay corporation tax. Corporation tax is a tax on the profits of a business. One of the main downsides of founding a private limited company is that there is more paperwork to do, because the business has to register with Companies House Any limited company or partnership business has to register with Companies House. These records are public and there is usually a fee to register. and file annual financial reports.
Some advantages of a private limited company
the owners have limited liability
it gives individuals the opportunity to be their own boss
any new shareholders need to be invited, which protects the business from outside influence
shares in the business can be sold to raise money
Some disadvantages of a private limited company
there is often more paperwork
in some instances, other people are able to view the business’ financial information
it can be very time consuming to set up
the business may require outside professional help to manage its finances
shareholders will expect to receive a percentage of the profits as dividendsA sum of money paid regularly by a company to its shareholders out of its profits.
