A private limited liability company is defined as one which by its activities restricts the rights to transfer its shares, limits the number of its shareholders from two to fifty, and prohibits any invitation to the public to subscribe for its shares and the name of the private liability company must end with the abbreviation of limited. e g. Bluebird Nigeria limited, Ausmer Nigeria limited etc.
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FEATURES OR CHARACTERTERTICS OF PRIVATE LIMITED LIABILITY COMPANY
- It is owned by two to fifty: the number of people that can form a private company should be between two and fifty.
- Restriction of shares: there is restriction on the transfer of its shares. The shares of a private company are not easily transferable.
- Limited liability: In the event of liquidation the shareholders lose only the total money invested in the business. The liability does not extend to their private property.
- Perpetual existence: The withdrawal or death of a shareholder may not affect the existence of the companies.
- Legal entity: it is recognized as a legal personality in law. It is quite district from the owners in the eyes of the law. The business can sue or be sued in its own name, without involving the owner.
- Shares are not quoted on the stock market: its shares are not quoted on the market. Therefore they cannot be bought or sold on the stock market.
- Objective: the major aim of private limited company is to make profit.
ADVANTAGES OF PRIVATE LIMITED LIABILITY COMPANY
- LARGE CAPITAL: Private Limited Liability Company can easily raise capital as a result of many shareholders that form the business.
- Shareholder have limited liability
- It has legal entity
- Continuity of existence
- Possibility of expression
- Large profit
DISADVANTAGES OF PRIVATE LIMITED LIABILITY COMPANY
- LIMITED CAPITAL: The capital available in a private company is not as large as that of a public company because they cannot appeal to the public for extra capital through the issuing of shares.
- Shares are not easily transferred.
- Delay in decision making.
- Lack of privacy: Financial statements are usually submitted to the registrar of companies annually.
- It prohibits invitation to shares: it does not allow the public to subscribe to its shares.
PUBLIC LIMITED LIABILITY COMPANY
Public limited liability companies are owned by private individuals and organizations. In this types of company, the minimum number of person that can form it is seven, while it has no maximum number. Public is used here in the sense that any member of the public is free to purchase shares in the business when shares are advertised for sale and the name of the public limited company must end with the abbreviation ‘Plc’.
FEATURES OR CHARACTERTERTICS OF PUBLIC LIMITED LIABILITY COMPANY
- The number of shareholder range from seven to infinity.
- The business is a separate legal entity.
- The shareholders enjoy limited liability
- The business has a perpetual existence.
- Capital is raise through the issuing of shares i.e. shares are advertised for sale to the general public. Capital can also be raised by issuing debentures and by borrowing from banks.
- Shares are easily transferable: Any shareholder is free to sell his shares in the business any time he likes. Since the shares are quoted on the stock exchanges.
- The public limited company must have its account publicized, usually annually.
- Shares are quoted on the stock market.
ADVANTAGES OF PUBLIC LIMITED LIABILITY COMPANIES (PLC)
- The business has large resources of capital because of the large number of shareholders in the company.
- Shareholders enjoy limited liability.
- The business risks are shared among a large number of persons
- The business has perpetual existence.
- The shares of the company are easily transferable for cash
- The company has the ability to secure efficient managers and other skilled personnel
- The business is a separate legal entity.
DISADVANTAGES OF PUBLIC LIMITED LIABILITY COMPANY
- Lack of privacy in financial reporting.
- There is delay in taking decisions
- It is also difficult to set up a joint-stock company
- Large capital requirement
- The shareholders cannot control the business
- There is lack of personal contract between the management and employees and between the company and its customers.
SHARES, BOUNDS AND DEBENTURES
SHARES: A share can be defined as a unit of capital of a company allocated to an individual.
DEBENTURE: This is a document given under a seal by a company in acknowledgement of a debt undertaking to repay the stated sum on or certain date and to pay a fixed rate of interest.
- Compare and contrast the private limited company with public limited company
- Explain 5 reasons why joint stock company is preferable to sole trading
- Differentiate between ordinary shares and preference shares.
- Explain five sources of finance that are available to a public limited company