How does a limited company differ from other legal forms of business organisations?

What does it mean when in law a limited company is regarded as a corporate association that has a legal identity in its own right, distinct from its owner. How does this differ with other legal forms of business organisations? ??

If there was a lawsuit won against the company for damages then the liablity is "Limited" to the assets of the company, not the assets of the owners of that company, that is the main difference, there are also different regulations regarding the reporting of accounts etc.

If you create a ltd company it basically creates a new legal person. That legal person can take out loans, enter into contracts etc. So say if you set up a company, and the company borrows some money & can't pay it back then the bank can not come to you to ask for the money. Also if, for example, the business is sued and the company the judge thinks that the company is at fault, they can not take the money directly from you (unless you are being sued as well). On the negative side you have to pay corporation tax on any profit and submit annual accounts.

there has to be at least two directors which are classed as employees. accounts have to be audited and published and the names and addresses of the directors are a matter of public record. private limited company investment can only be by invitation and public limited company shares sold on the stock market. in law it is assumed profit is shared equally unless there is an agreement to state otherwise liability is equal anyway. if one of the directors leaves dies etc the agreement needs to be renewed this would also apply if a new director is added.

if i own a limited company and i mess up badly - run into thousands of pounds debt for example - then the most my creditors can take is the money i have invested in the company. (the assets of the business)
i can go home to my house and call it a day - nobody will try to repossess my home, car,etc.
good for the owner (not homeless/broke) - bad for creditors (cant collect their debts).

Anything that is in the company such as assets including debt is under a limited name not the owners name so he is not fully responsible when things go wrong he will only lose what hes already invested under the limited name, i think

Only the assets of the company are at risk. in a limited liability company. Your personal wealth is safe.

A limited company is as you say a legal person in that it can be liable for it's debts up to the limit of the assets owned by the company. PLC's are in much the same position. Now partnerships are liable to the value of the partners assets. A sole trader who is not a limited company is liable for everything he owns which is why a lot of them have their houses etc in their wife's name. There are other forms of legal persons such as vicars who legally own the church building and what is in it as the vicar but not as themselves as a person. Just as the queen owns a lot of property personally but she also owns property in the name of the crown. So when she dies the crown property becomes the property of Prince Charles but she can will her personal property to whom she likes

A Business is either A sole Trader arrangement of one person, or a partnership of 2 or more persons. These individuals are the business, and are responsible for both the decisions of the business and handling issues with said business. If the Owners leave, the business ussually ceases to be. Businesses do not need to be registered, and have limited legal restrictions. Businesses also do not have to disclose their business records.

A company is run a board of directors, and is a sepaerate legal entity on it's own. Decisions are ussually taken as a vote on the directors. The company is owned by the shareholders, any of whom can be removed from the board.

There are four main types of company:

* Private company limited by shares - members' liability is limited to the amount unpaid on shares they hold. This includes those community interest companies (CICs) which are private companies limited by shares.
* Private company limited by guarantee - members' liability is limited to the amount they have agreed to contribute to the company's assets if it is wound up. This includes all RTM (Right to Manage) companies-, commonhold associations and those community interest companies which are companies limited by guarantee.
* Private unlimited company - there is no limit to the members' liability.
* Public limited company (PLC) - the company's shares may be offered for sale to the general public and members' liability is limited to the amount unpaid on shares held by them. This also includes community interest public limited companies. (that is, CICs which are PLCs). More about PLCs can be found in chapter 2.

The principal point is that Companys receive investments from shareholders to provide funding to the company, and in return, these shareholders receive a share of the profit.

Contrary to widely held belief, it does not always provide protection for the directors. Under certain company structures included in the list above, If the company is unable to repay their debts, the board of directors become responsible for repaying these losses. This has recently happened in the Farepak Hampers Case, who recently went into insolvency, and a lot of directors possesions had to be used to repay the debts.

To run a company, certain forms, reports and information must be sent to Companies House for public access.

Enter Your Message or Comment

User Name:
User Email:
Post a comment:

Archive: Forum -Forum -Finance - Links - 1 - 2 - RSS - All RSS Feeds
The Causes and the Results. 0.024
Copyright (c) 2011 Financial Crisis Sunday, May 27, 2012 - Terms of use - Privacy Policy