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Explain the key features of limited companies


explain the key features of limited companies

What is a Limited Liability Partnership (LLP)? · Key features of a limited company · Advantages of a limited company · Disadvantages of a limited company. 6 See infra notes 35-42 and accompanying text (explaining that S-corporations allow for both limited I. MAJOR FEATURES OF LIMITED LIABILITY COMPANIES. Limited Liability Partnerships are the perfects business solution for many This is not an exhaustive list but covers some of the key benefits on an LLP.
explain the key features of limited companies

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What is LIMITED LIABILITY COMPANY? What does LIMITED LIABILITY COMPANY mean?
explain the key features of limited companies

Explain the key features of limited companies -

Key Features of Limited Liability Companies and Partnerships

Limited liability is a feature describing an amount invested in a company or partnership. Shareholders can claim ownership up to the amount they have invested in a business. General partners, on the other hand, have an unlimited liability.

If customers, partners, or third parties file a lawsuit, they are suing the partnership/company and not the investors or stockholders. They are not liable for loans and other debts that the company has. Unlike them, investors, owners of general partnerships, and sole proprietors are liable for business debts.

Features of Limited Liability Companies

LLCs combine features of corporate businesses and sole proprietorships. They dissolve in case of bankruptcy or the death of a partner while corporations can continue their operations if any of these happens. The company is dissolved if a partner leaves. The other members can start a new company or partnership.

There are certain advantages to incorporating an LLC. One is that the partners can choose how to be taxed – like a C or S corporation, partnership, or sole proprietorship. Double taxation does not apply. Another advantage is that LLCs have less record keeping, including supporting documents, records, books, and reports. Corporations are not required to hold quarterly or board meetings. The owners are not responsible for poor financial, management, and legal decisions made by one partner. In addition, the partners can choose how to distribute the profits. Investors have no or little say in the normal operations of the company, unless specified in the operating agreement. The requirements for running an LLC are not as strict as that for corporations, which gives businesses more flexibility.

Disadvantages of LLCs

While double taxation is not an issue, all shareholders and owners must report losses and profits in their tax returns. This is done regardless of whether they receive dividends and is called pass-through taxation. LLCs also pay additional taxes in some jurisdictions. These include capital values or franchise tax. They also pay excise and sales taxes similar to other types of businesses. In addition, the partners pay self-employment tax contributions because they are considered self-employed.

Incorporating an LLC

There are several steps to follow, and the first is to choose a business name. The next step is to file the articles of incorporation, which include details such as the names of the partners, address, company name, and others. Depending on the jurisdiction, the company may have to file with the Department of Commerce, the Corporation Commission, or another agency. The third step is to develop an operating agreement which outlines the structure, financial matters, regulations, and operations. The agreement specifies the responsibilities of the partners, their rights, and the way losses and profits are recorded and allocated. As a next step, the partners should obtain all permits and licenses, required for the specific sector. They may vary in different municipalities and states. Finally, the company should hire employees and workers and announce the start of its operations. The requirements vary, and it is best to contact the local filing office for more information.

Differences Between LLPs and LLCs

A limited liability partnership is one type of arrangement under which the partners enjoy a degree of protection from liability. It is not considered a separate entity, meaning that the partners must report losses and profits. The partners are not responsible for employee negligence. However, they are liable for the actions of workers who are under their supervision. In addition, the partners are liable for debts owed to landlords, financial institutions, and businesses. In some countries and jurisdictions, LLPs must have one or more general partners. Existing and new businesses with two or more partners can establish an LLP.

There are certain disclosure requirements that partnerships must follow. They should notify of any changes to residential addresses, membership, member names, and registered addresses. In addition, they should file annual returns. Partnerships also have designated members who are assigned duties and tasks such as filing and signing of annual accounts and filing annual returns. Finally, LLPs should present a statement of liabilities, debts, and assets in case of insolvency.

According to proponents, LLPs combine the best features and practices established by partnership and company low. Critics note that this form may actually confuse principles, making it more difficult to operate as a coherent entity. They also claim that an LLP is not a suitable arrangement for small businesses. For investors, limited liability partnerships involve risk and higher costs.

Источник: http://www.financialized.com/Investing/features-of-llc-partnerships

Public Limited Company is the legal designation of a limited liability company which has offered shares to the general public and has limited liability. The Company that is being constructed by a minimum of 7 people and maximum according to the shareholders with limited liability is called the public limited company.

A public limited company is a legal description of a limited liability company. This means that the public company grants limited responsibility to the owners and management.

The features of a public limited company are discussed below:

For the formation of such a company, there are some further legal procedures even after getting the letter of incorporation and certificate of commencement. For this reason, the formation of the public limited company is quite complex and time-consuming.

The first and main feature of Public Limited Company is that has a minimum of 7 members and maximum limit is restricted by the number of shares. If needed, the maximum number of members can be enhanced by correcting the memorandum of association.

This type of company is obligated to published prospectus or statement in lieu of prospectus and they are required to send this copy to the registrar. However, in the case of Private Limited Companies, the public is not invited to subscribe for the shares of the company.

The Company keeps on accessible in the eyes of law even in the case of death, insolvency, the economic failure of any of its members. This leads to the perpetual succession of the company.

The public limited company has than capital which refers to the fund’s arrangement by issuing shares in return for cash or other considerations. The amount of share capital of a company can change over time because each time a business sells new shares to the public in exchange for cash, the amount of that capital will increase.

  • Transferability of shares

Shares of the public limited company are purchased and sold in a stock exchange market. They are freely transferable between the members and people trading in the stock exchange.

This Company is also obligated to arrange a statutory board meeting, financial statements, audit, and inspection and send statements to the registrar, etc.

The Company has its own separate logo. The company is obligated to use this logo in its all types of operations and functions.

Shareholders’ liability for the losses of the company is limited to their share contribution only. This makes a separate legal entity from shareholders. The business can be sued on its own and not involve its shareholders. It means that if a company faces loss under any circumstances then its shareholders are liable to sell their own assets for payment. The personal, individual assets of the shareholders are not at risk.

Public limited companies are headed by a board of directors. Normally this comprises a minimum number of three members and a maximum of 12. They are elected by the shareholders during the annual general meeting. They act as the representatives of the shareholders in the management of the company.

As it is possible to enter into a public limited company by buying its shares. This is also possible to leave anytime by transferring those shares to others. So it is fully dependent on the will of the concerned people, for which it is to be said as a voluntary organization.

It is the amount receives by the company which is 90% of the shares issued within a certain period of time. If the company is not able to receive 90% of the amount then they cannot commence further business.

Analyzing the above-mentioned features, we get to know that it is the public limited company which falls under the definition of Joint Stock Company in a true sense. These features establish it as a real form of a Joint Stock Company.

Источник: https://qsstudy.com/business-studies/features-public-limited-company

What are the different types of limited companies?

There are several different kinds of limited companies available to set up in the UK. Limited companies are the second most popular business structure in the UK, only coming second to sole traders. The type of limited company structure chosen for a business will depend on various factors such as the number of shareholders, the responsibility that the shareholders have and the level of involvement by the public. Each has their own benefits, so each business will need to decide what is the most suitable structure for them.

Types of limited companies

The most popular kind of limited company in the UK is a private limited company, limited by shares. Although that is the most popular model of a limited company, there are others that also come under the category of a limited company. Here are the different types of limited companies that you can set up and run in the UK.

Private limited company – limited by shares (Ltd.)

A private limited company – limited by shares is a private company. Therefore, members of the public are not able to buy shares of the business. The ‘limited liability’ refers to the shareholders only being liable for their percentage of investment. For example, if a shareholder invests 20% of the cost for the business, then they are only responsible for the 20% of the company, including any debts. This is the most popular kind of limited company in the UK.  One of the many benefits of this structure is that it is easy to set up and it can be completely done online. An example of a private limited company – limited by shares is Virgin Atlantic.

Private limited company – limited by guarantee (LBG)

A private limited company – limited by guarantee is usually a company that is non-profit or a charity. This means that the individuals are not responsible for the amount they invested in the company as this type of company does not have shareholders. The people that are responsible for the business and any type of the debts are members of the board who act as guarantors. These guarantors then pay sums to cover any business debts, should the need arise.  An example of a private limited liability company – limited by guarantee that operates in the UK is Oxfam.

Public limited company (PLC)

A public limited company is similar to a private limited company, limited by share. The main difference is that a public limited company offers its shares to the members of the public. This means that members of the public can be shareholders of a company. As there are more people involved including these members of the general public, there are more legal requirements. Some requirements for a company to go public are having two company directors, two shareholders, a company secretary and at least £50,000 of issued share capital. An example of a private limited company is Barclays.

Limited liability partnership (LLP)

A limited liability partnership is similar to a limited liability company – limited by shares, however, instead of shareholders, there are partners. Also, the partners are not just liable for just their share of the business but are responsible for an equal part of the business. For example, if a company has four partners, each partner will be responsible for 25% of the business (which includes any debts). This structure is ideal if the partners want to be equally involved in the business as much as their partners, rather than just being shareholders. One of the biggest distinctions between a limited liability partnership and other limited companies is the role of the partners. The partners can actually directly manage the business. Other limited companies have a vote by the shareholders to elect a board of directors, who then select individuals to run the business. An example of a limited liability partnership is Deloitte & Touche.

Private unlimited company

A private limited company doesn’t have to submit an annual return or any financial statements compared to other limited companies. This enables a private unlimited company to remain private. The private unlimited company structure doesn’t have shareholders that are responsible for the amount of investment they’ve invested in the business. All the shareholders of a private unlimited company are responsible for business liabilities. If the company was to go bust and had debts, all the shareholders would be equally responsible and would have to share the debt. This type of limited company is quite rare. An example of a private unlimited company is Credit Suisse International.

More on limited companies, setting up a limited company, and register your limited company.

Источник: https://www.companybug.com/types-of-limited-companies/

Characteristics of Public Limited Company

A Public Limited Company is a company with limited liability and offers shares to the general public. Further the stock of Public Limited Company can be acquired by anyone through IPO or via trades. In this article we will discuss major characteristics of a Public Limited Company.

Definition of Public company

A public company as per Section 2(71)-

  • A company which is not a private company.
  • A company whose minimum paid up capital is Rs. 5, 00,000.
  • The company being subsidiary of a company, which is not being a private company it shall be a public company for the purposes of the act.

What are the major characteristics of a Public Limited Company?

Some of its major characteristics are as follows:

A Public Company is a legal entity that has separate identity from its shareholders/members.

This means that a shareholder of public limited company can easily transfer its shares to the public. There is no restriction on the transferring shares to the public or inviting the public to subscribe shares to the public.

The company can never come to an end. This means that the members/ directors/ shareholders may come and go, but the company never becomes non-existent. Due to the death or disability, the company never dies. It continues till the company is not closed or liquidated.

The liability of the shareholders/directors is limited to the extent of the shares owned by them. The shareholders are not liable personally in case of losses or debts suffered by the company. 

The minimum paid up capital required by public company to start its operations are Rs 5, 00,000. This is the new amendment as per the Companies Act, 2013[1].

In the name of the public company, the word “LTD” will be prefixed at the end of the name.

In case of public company, the number of directors can be minimum 3 and maximum can be as many. There is no above limit.

They must only possess the Director Identification Number (DIN) which is issued by the Ministry of Corporate Affairs (MCA).

The registration of public limited company can issue a prospectus for inviting the public to subscribe to its shares.

Prospectus is the statement comprising the detail information about the company and the number of shares invited by the company in that particular IPO or subsequent listing.

The attraction point of the public company is that it can borrow from various sources. A public company can issue Debentures (secured or unsecured) and raise the money. It can issue shares (equity or preference) to the public. Even banking and other financial institutions give the loans/ financial aid to the company.

The minimum number of members in the public company required is 7 and for maximum there is no limit.

The minimum number of BOD required is 3 and maximum is 12. They are elected by shareholders in the Annual General Meeting.

It is easy to buy shares in the public company and so it is as easy to exit the public company.  

The minimum amount which has to be received on the subscription of shares has to be 90 percent of the shares in the public company. When the company is not able to receive the 90 percent amount then they cannot continue with the business.

The minimum subscriber to the Memorandum of Association of Public Company has to be 7.  They are the members of the company.

  • Certificate of Commencement

While in the case of public company, this is an important document which has to be acquired by the public company before starting the business. In case of private company, the Certificate of Incorporation was the last document required. However in case of a public company, the Certificate of Incorporation as well as Certificate of commencement is required both.

  • Memorandum of  Association

The MOA is a major document in the formation of public company. A private company can start its business after making only Articles of Association. Whereas for the public company the Memorandum is its important document which has to be submitted to MCA as well in the registration of the company.

Memorandum is defined in section 2(56) of Companies Act 2013. It states the main objectives of the companies that is, the main businesses which the company is going to undertake.

Comparison between Public Company V/S Private Company

S.No.PARTICULARSPUBLIC COMPANYPRIVATE COMPANY
 1.Minimum members72
 2.Maximum membersNo maximum limit200
 3.Commencement of businessThey have to obtain with certificate of incorporation , the certificate of commencementThey have to only obtain certificate of incorporation and no certificate of commencement
 4.Minimum subscriptionRs. 500,000Rs. 100,000
 5.Issue of prospectusCan make prospectus for invitation of its shares to the public. They have to make prospectus or statement in lieu of prospectus for invitation of subscription of sharesNo prospectus. As no invitation public is made
6. Transfer of sharesEasily transferrable within public.Restriction on transfer to the public. Within members is allowed
 7.Statutory meetingThey have to hold statutory meeting within 6 months of its commencement of business.No need to hold statutory meeting.
 8.Articles of associationThey can adopt table under schedule I of companies act, 2013.They can make its own articles of association.
 9.No. Of directors32
 10.Consent of directorsRequired in writingNo requirement
 11.Qualification sharesA minimum shares is required to qualify as directorNo such requirement
 12.Retirement of directorsMinimum two third directors retire by rotationNo such compulsory Retirement
 13.Name of the companyMust contain ltd at the endMust contain pvt ltd at the end
 14.Meeting quorum52
 15.Inspection of accountsOpen for public inspection.Not for public inspection.
 16.Annual returnThey have to file only return and no declaration.They have to file return with a declaration that no of members does not exceed 200 and no share capital or debenture is issued to the public.

Conclusion

Looking at the current market and growing economy, forming a public company is a good option. It is always considered an appropriate for the business which has a large amount of capital to invest. By inviting public to subscribe share, it improves the capital of the company. It helps in reducing the overall risk of the company, as capital is invested in the diversified number of securities. It ultimately gives, the growth opportunities to the company.

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Sonal Pruthi

Sonal Pruthi

She is B.Com (H), LL.B LLM, Cs (Module 2) And Certification In Cyber Law From ILI Qualified. She has Been A Legal Teacher In The Previous Organization. My Strength Is My Expertise Knowledge In Civil Laws, Corporate Law And Tax Laws. I Have Been Legal Teacher And Legal Trainer In The Past Organization. Her Knowledge About The Subjects Have Expanded Due To Teaching Number Students From Various Universities All Over India.

Источник: https://enterslice.com/learning/characteristics-of-public-limited-company/

Characteristics of a Limited Liability Company

By Mike Broemmel

Create clear terms and conditions on your sales contract.

The laws of all 50 states permit a business to be organized as a limited liability company, or LLC, according to Nolo. Once organized and established, a limited liability company obtains the status of an independent legal entity capable of undertaking the same types of business operations as a corporation or partnership.

Function

The function of a limited liability company is to provide business owners with protection from personal liability for the activities of a business. In this way, a limited liability is like a corporation. For example, if the limited liability company is sued, the party seeking compensation cannot go after the assets of the owners of the business.

Features

The owners of a limited liability company are called members. Typically, one of the owners is designated to serve as the managing member, overseeing the day-to-day operations of the enterprise.

Effects

One of the primary effects of establishing a limited liability company is a significant tax benefit, according to IRS.gov. An LLC permits what is known as "pass-through" taxation. Unlike a corporation which must pay taxes directly, along with taxes paid by shareholders for their own profits, a limited liability company is not taxed. The tax liability passes through to the individual owners or members.

Creation

A limited liability company is created by filing articles of organization in the state where the business is headquartered. The secretary of state provides a standard form for this purpose.

Misconceptions

A common misconception associated with a limited liability company centers on paperwork and record keeping, according to "Form Your Own Limited Liability Company" by Anthony Mancuso. The misconception is that a limited liability company requires the same types of records as a corporation. In fact, one of the benefits of a limited liability company is far less substantial paperwork and record keeping requirements. For example, unlike corporations, minutes of the meetings of the members of a limited liability company do not need to be taken or maintained. A corporation must maintain these types of records or run the risk of losing its legal authority.

References

Resources

Writer Bio

Mike Broemmel began writing in 1982. He is an author/lecturer with two novels on the market internationally, "The Shadow Cast" and "The Miller Moth." Broemmel served on the staff of the White House Office of Media Relations. He holds a Bachelor of Arts in journalism and political science from Benedictine College and a Juris Doctorate from Washburn University. He also attended Brunel University, London.

Источник: https://smallbusiness.chron.com/characteristics-limited-liability-company-3676.html

Limited Liability Company (LLC)

Definition of Limited Liability Company

According to definition a Limited Liability Company (LLC) is a corporate structure in which the shareholders of the company have limited liability to the company’s actions. A Limited Liability Company provides the shareholders the required personal liability protection for any action of the business. The compensation of the business is not recovered with the assets of the owners.

Features of Limited Liability Company

Limited Liability Company (LLC) provides the owners of the business protection against any losses that a business might face. The owners of the business are called members and by voting one of the owners is assigned as the managing member who would take care of the daily operations of the business and other business operations. The flexibility of the owners is pretty much like that of a partnership. The Limited Liability Company (LLC) is formed by filing articles of association in the state where the company is being formed.

Advantages of Limited Liability Company (LLC)

The following are the advantages of a Limited Liability Company:

  • The Limited Liability Company can be formed with one member only, and the member can be a whole company.
  • The owners are protected against company liabilities.
  • The decision making for the company rests with the Managing member of the Limited Liability Company so there is no need for regular meeting of the board members.
  • There is very little need for book keeping and other financial and administrative record keeping in explain the key features of limited companies Limited Liability company.

Disadvantages of a Limited Liability Company

The following are the disadvantages of a Limited Liability Company:

  • The earnings of the company are subjected to employment tax.
  • The Limited Liability Company is like a partnership and cannot make profits out of the incentive stock.
  • There are different rules for every state. So there are different rules for taxation in every state. Some have tax while most others do not.

A Limited Liability Company (LLC) offers the necessary protection against various law procedures to the owners of the company against any liabilities that are caused to the business. 

Источник: https://www.readyratios.com/reference/business/limited_liability_company_llc.html

Limited liability is the extent to which a company shareholder or director is financially responsible for their company’s debts.

To benefit from limited liability, a business must be incorporated at Companies House to become a private limited company (LTD), public limited company (PLC) or limited liability partnership (LLP).  

Once it has been incorporated, the business becomes a separate legal entity from its owners. That means the finances and assets of the individual and the finances and assets of the company are completely separate. If the company is sued or cannot pay its debts, the owners are only liable for the debt to the value of the money they have already invested in the business.

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Limited Liability

What Does Limited Liability Mean?

The clear separation between individuals and their companies is a pivotal aspect of corporate law.

In the case of limited companies, this means that shareholders can only be held liable for company debts up to the value of their shares.

Directors cannot be held personally liable for company debts (unless they are shareholders in which cases the rules already explained apply)

The same goes for legal threats. When a company is sued, it is the legal structure that is the company which is being sued, not the individuals involved.

The same rules apply for members of LLP’s (Limited Liability Partnerships) or Limited Partnerships.

What are the Advantages of a Limited Liability Company?

There are a number of compelling advantages associated with a limited liability company. That includes:

No personal liability for company debts

One of the primary reasons the owners choose to incorporate their business is to avoid personal liability for company debts.

This allows the directors to trade without putting their personal property, cash and other assets at risk. As long as they adhere to their duties and responsibilities as directors then in the case of insolvency, the creditors will only be able to recover money they are owed from the bank account and assets of this business.

Tax efficiency

Limited companies are taxed on their profit at a rate of 19 percent. They are not subject to the personal tax rates placed on sole traders and partnerships (unlimited companies) which can be as high as 45 percent.

Directors of limited companies can pay themselves a salary at the personal allowance level and take the rest of their pay as dividends, which are taxed at a lower rate. This will reduce the tax burden and keep more money in their pocket.

Succession planning

As a limited liability company is deemed to be a separate legal entity from its owners, the company will continue to exist beyond the life of its members. That means, if directors or members retire or experience ill-health, the company will continue to exist and operate. This can provide security for employees and other company members.     

Employee buy-in

Another benefit of a limited liability company is the ability for key employees to be granted shares via a company share scheme. This can boost employee motivation and provide a monetary reward beyond a mere salary. Having a vested interest in the company’s success can also improve employee loyalty.

Protection of the company name

As part of the process of registering a limited liability company, a company name must be chosen. Company names can become valuable assets. Registering a name at Companies House prevents other businesses from using the same name.  However, Companies House will accept the registration of a name which is very similar, so it may be worth registering alternative optum vision care or versions of the same name and keeping those as dormant companies.

What is a Limited Liability Company Agreement?

As part of the limited liability company registration process, by law, you have to create certain documents. That includes the Articles of Association, which sets out the rules company officers have to follow in the running of the company, and a Memorandum of Association, which gives notice of an individual’s intention to become a company shareholder.

Another document that isn’t required by law is a limited liability company agreement.

Also known as a shareholders’ agreement or an LLP agreement, this document intends to formalise the relationship between shareholders or partners. It formalises what will happen when there are differing opinions about the direction the company will take, establishes how explain the key features of limited companies business will be run and sets the ground rules for the relationship.

A simple way to think of a limited liability company agreement is as the terms & conditions for company directors.

Although similar to the Articles of Association in its content, the main difference is that the Articles of Association has to be made public, while the limited liability company agreement is a private contract between shareholders.

What is a Private Company Limited by Guarantee?

Companies limited by guarantee are usually not-for-profit organisations like charities, sports clubs, societies and community projects. They are not set up to make a profit for the shareholders. Instead, any money they make is retained within the organisation or used for some other purpose.

A private company limited by guarantee is a separate legal entity that’s responsible for its own income, assets, debts and liabilities, just like any other limited liability company.

However, instead of issuing shares, the company is owned by guarantors. Their personal liability for the debts of the organisation is limited to a fixed amount of money called a guarantee. This guarantee is written into the company’s Memorandum of Association and requires the guarantors explain the key features of limited companies pay the company’s debts up to a fixed sum, which is usually £1.

A company limited by guarantee must have at least one director, although most have several. The directors may also be given some other name like trustees, governors, the board of managers or the management committee. Whatever their title, they are responsible for the day-to-day running of the organisation.   

What is the Liability of a Limited Liability Company?

The basis of a limited liability company is that all debts incurred are the debts of the company and are not the responsibility of the shareholders or directors. In a company that’s limited by shares, the shareholders’ obligation is to pay the company for the shares they have. Once those shares have been paid for in full then no further money is payable.

In the case of a company that’s limited by guarantee, each guarantor will be liable for the company’s debts up to the value written into the Memorandum of Association, which is usually just £1.

The only way a director or shareholder can become liable for company debts over the value of their original shareholding holding or guarantee is where personal liability is imposed by the court. This can be the case in instances of wrongful or fraudulent trading.

Some creditors such as banks and other finance providers may ask directors to give personal guarantees for loans, overdrafts and a lease of premises. If the business does fail then the director will be obliged to pay those debts from their personal funds.

Directors Personal Liability in a Limited Company

Although limited liability provides a great deal of protection for company shareholders and directors, there are some circumstances when they can become personally liable for business debts. That includes:

What are Limited Liability Company Debt Obligations?

Despite the protection of limited liability, company debts can still be very stressful and worrying for the directors. Not only is their livelihood at risk, but they also have to be aware of their changing obligations.

Once cash-flow is compromised, a business can decline very quickly. Directors then have to monitor their financial position very carefully. If the business becomes insolvent (you can check using this free insolvency test) then they must prioritise the creditors’ interests. Failure to do so could lead to personal liability for a proportion of the company’s debts further down the line.  

Company debts can include unpaid supplier invoices, unpaid rent and even wages owing to employees. However, one of the most worrying debts of limited liability companies are those owing to HMRC. VAT, PAYE and corporation tax debts are a common issue for company directors. HMRC has its own range of powers to pursue arrears aggressively which can make this situation incredibly stressful.  

Obtaining help and support to deal with limited liability company debts, and specifically tax debt, is essential. Being proactive about controlling cash-flow and putting a firm plan in place is an important first step, as is identifying areas of the business where money is being wasted.

Company debt experts can help struggling directors to explore debt refinancing and consolidation options which could provide the working capital required to repay creditors and drive the business forward.

How can we help?

As a UK leader in limited liability company rescue and recovery, we can provide you with the expert advice and practical assistance to support you as a director. Please call us on 08000 746 757, email [email protected] or call our senior consultant Sue directly on 07949 969 006

Источник: https://www.companydebt.com/what-is-limited-liability/

What are the different types of limited companies?

There are several different kinds of limited companies available to set up in the UK. Limited companies are the second most popular business structure in the UK, only coming second to sole traders. The type of limited company structure chosen for a business will depend on various factors such as the number of shareholders, the responsibility that the shareholders have and the level of involvement by the public. Each has their own benefits, so each business will need to decide what is the most suitable structure for them.

Types of limited companies

The most popular kind of limited company in the UK is a private limited company, limited by shares. Although that is the most popular model of a limited company, there are others that also come under the category of a limited company. Here are the different types of limited companies that you can set up and run in the UK.

Private limited company – limited by shares (Ltd.)

A private limited company – limited by shares is a private company. Therefore, members of the public are not able to buy shares of the business. The ‘limited liability’ refers to the shareholders only being liable for their percentage of investment. For example, if a shareholder invests 20% of the cost for the business, then they are only responsible for the 20% of the company, including any debts. This is the most popular kind of limited company in the UK.  One of the many benefits of this structure is that it is easy to set up and it can be completely done online. An example of a private limited company – limited by shares is Virgin Atlantic.

Private limited company – limited by guarantee (LBG)

A private limited company – limited by guarantee is usually a company that is non-profit or a charity. This means that the individuals are not responsible for the amount they invested in the company as this type of company does not have shareholders. The people that are responsible for the business and any type of the debts are members of the board who act as guarantors. These guarantors then pay sums to cover any business debts, should the need arise.  An example of a private limited liability company – limited by guarantee that operates in the UK is Oxfam.

Public limited company (PLC)

A public limited company is similar to a private limited company, limited by share. The main difference is that a public limited company offers its shares to the members of the public. This means that members of the public can be shareholders of a company. As there are more people involved including these members of the general public, there are more legal requirements. Some requirements for a company to go public are having two company directors, two shareholders, a company secretary and at least £50,000 of issued share capital. An example of a private limited company is Barclays.

Limited liability partnership (LLP)

A limited liability partnership is similar to a limited liability company – limited by shares, however, instead of shareholders, there are partners. Also, the partners are not just liable for just their share of the business but are responsible for an equal part of the business. For example, if a company has four partners, each partner will be responsible for 25% of the business (which includes any debts). This structure is ideal if the partners want to be equally involved in the business as much as their partners, rather than just being shareholders. One of the biggest distinctions between a limited liability partnership and other limited companies is the role of the partners. The partners can actually directly manage the business. Other limited companies have a vote by the shareholders to elect a board of directors, who then select individuals to run the business. An example of a limited liability partnership is Deloitte & Touche.

Private unlimited company

A private limited company doesn’t have to submit an annual return or any financial statements compared to other limited companies. This enables a private unlimited company to remain private. The private unlimited company structure doesn’t have shareholders that are responsible for the amount of investment they’ve invested in the business. All the shareholders of a private unlimited company are responsible for business liabilities. If the company was to go bust and had debts, all the shareholders would be equally responsible and would have to share the debt. This type of limited company is quite rare. An example of a private unlimited company is Credit Suisse International.

More on limited companies, setting up a limited company, and register your limited company.

Источник: https://www.companybug.com/types-of-limited-companies/

Key Features of Limited Liability Companies and Partnerships

Limited liability is a feature describing an amount invested in a company or partnership. Shareholders can claim ownership up to the amount they have invested in a business. General partners, on the other hand, have an unlimited liability.

If customers, partners, or third parties file a lawsuit, they are suing the partnership/company and not the investors or stockholders. They are not liable for loans and other debts that the company has. Unlike them, investors, owners of general partnerships, and sole proprietors are liable for business debts.

Features of Limited Liability Companies

LLCs combine features of corporate businesses and sole proprietorships. They dissolve in case of bankruptcy or the death of a partner while corporations can continue their operations if any of these happens. The company is dissolved if a partner leaves. The other members can start a new company or partnership.

There are certain advantages to incorporating an LLC. One is that the partners can choose how to be taxed – like a C or S corporation, partnership, or sole proprietorship. Double taxation does not apply. Another advantage is that LLCs have less record keeping, including supporting documents, records, books, and reports. Corporations are not required to hold quarterly or board meetings. The owners are not responsible for poor financial, management, and legal decisions made by one partner. In addition, the partners can choose how to distribute the profits. Investors have no or little say in the normal operations of the company, unless specified in the operating agreement. The requirements for running an LLC are not as strict as that for corporations, which gives businesses more flexibility.

Disadvantages of LLCs

While double taxation is not an issue, all shareholders and owners must report losses and profits in their tax returns. This is done regardless of whether they receive dividends and is called pass-through taxation. LLCs also pay additional taxes in some jurisdictions. These include capital values or franchise tax. They also pay excise and sales taxes similar to other types of businesses. In addition, the partners pay self-employment tax contributions because they are considered self-employed.

Incorporating an LLC

There are several steps to follow, and the first is to choose a business name. The next step is to file the articles of incorporation, which include details such as the names of the partners, address, company name, and others. Depending on the jurisdiction, the company may have to file with the Department of Commerce, the Corporation Commission, or another agency. The third step is to develop an operating agreement which outlines the structure, financial matters, regulations, and operations. The agreement specifies the responsibilities of the partners, their rights, and the way losses and profits are recorded and allocated. As a next step, the partners should obtain all permits and licenses, required for the specific sector. They may vary in different municipalities and states. Finally, the company should hire employees and workers and announce the start of its operations. The requirements vary, and it is best to contact the local filing office for more information.

Differences Between LLPs and LLCs

A limited liability partnership is one type of arrangement under which the partners enjoy a degree of protection from liability. It is not considered a separate entity, meaning that the partners must report losses and profits. The explain the key features of limited companies are not responsible for employee negligence. However, they are liable for the actions of workers who are under their supervision. In addition, the partners are liable for debts owed to landlords, financial institutions, and businesses. In some countries and jurisdictions, LLPs must have one or more general partners. Existing and new businesses with two or more partners can establish an LLP.

There are certain disclosure requirements that partnerships must follow. They should notify of any changes to residential addresses, membership, member names, and registered addresses. In addition, they should file annual returns. Partnerships also have designated members who are assigned duties and tasks such as filing and signing of annual accounts and filing annual returns. Finally, LLPs should present a statement of liabilities, debts, and assets in case of insolvency.

According to proponents, LLPs combine the best features and practices established by partnership and company low. Critics note that this form may actually confuse principles, making it more difficult to operate as a coherent entity. They also claim that an LLP is not a suitable arrangement for small businesses. For investors, limited liability partnerships involve risk and higher costs.

Источник: http://www.financialized.com/Investing/features-of-llc-partnerships

What is a Limited Liability Company?

Limited Liability Company is explain the key features of limited companies. term wherein the members of the corporate structure are not personally liable for the debts and obligations. It may or may not 1st summit bank review an incorporated association. One needs to file the “Articles of Organizations” within his state. It is the combination of both the features of sole proprietorship or partnership and corporation. It has a feature of limited liability of a corporation and the flexible tax structure of partnership or sole proprietorship. The owners of the beneficial rights are called “members” rather in normal terms “shareholders&rdquo.

Creation of Limited Liability Company

  1. Choose a legal business name available in your state.
  2. File Articles of Organizations (normally called) and pay the filing fees as per the state norms.
  3. Need to create to an Operating Agreement though not mandatory but advisable which includes the rights and liabilities of the members of the LLC.
  4. Publish a notice in a local newspaper for a few weeks of the intention to form an LLC. This requirement is of some states only.
  5. After all the steps, an official LLC is formed. But one has to obtain all the necessary licenses and permits required to operate the business.

Limited Liability Company

Features of Limited Liability Company

The laws of the LLC differs from state to state. But hereby, we discuss some common features that are explain the key features of limited companies common in almost all the jurisdictions.

Separate Entity

LLC is a separate legal entity in almost many states; meaning thereby that it can own a property, retain attorneys, sell or buy a property, etc on its own. It is distinct from its owners. Owners are not responsible for the obligations of the corporation.

Limited Liability

One of the features of LLC is the limited liability of the employees, members, managers, etc. It simply means that the members are not responsible for the misdeeds, legal faults of the other members. Hence, they have protection for the same. But they are responsible for their own wrong legal misconducts.

Tax Ease

This feature of LLC gives the members of the corporation an option to tax themselves either as a sole proprietorship, partnership or as C or S corporation unless otherwise stated. Sole proprietorship- as a single member, partnership- as a group of members, and C or S corporations- as a single or multi-members. By choosing the right type of corporate structure, it helps the LLC members to decide which of them is the most suitable and profitable for them.

Simplicity

There is a simplicity in the case of documentation and carrying out operations of the explain the key features of limited companies. There is a less record keeping comparatively.

Flexibility

While the corporations continue to operate in case of any death or insolvency or if anybody leaves. But this condition is not compulsory in the case of LLC. It is fully the member’s decisions to whether or not continue in the same company or create their new one.

Advantages of Limited Liability Company

  • Pass through Income Taxation i.e. there is no double taxation. The LLC owners file their own personal tax returns, they need not file that of LLC avoiding double taxation except if taxed as a C Corp.
  • There are fewer regulations in LLC compared to other organizations.
  • The members of the LLC get somewhat or full protection from the acts and obligations of the LLC depending on the state laws.
  • There are less paperwork and less record keeping comparatively.
  • Since there is a flexibility for selecting how the members are to be taxed, they can plan for income and taxation.
  • Even a single natural person can start an LLC if it is not restricted by the state.

For more coverage on Advantages, please read our article on Advantages of Limited Liability Company

Disadvantages of Limited Liability Company

Though there are many advantages to LLC, there are disadvantages too. Let’s glance at them.

  • As we discussed earlier that the LLC may or may not require legal formalities and organized manner to run itself, not many would show a great interest in investing in the same. Explain the key features of limited companies might face many financial issues as investors look at the goodwill and explain the key features of limited companies obviously their maximum and secured returns now and in future.
  • There may be a possibility that the LLC shuts down and either merges with another corporate structure or decides to form a new one. So, this does not only lead to huge expenditure but also to a breach of confidentiality and security risks.
  • There is not much clarity in the management structure which can be a pro for some. But unclarity is always some or the other way not so preferable by many.
  • Since there are different titles (manager, member, managing member, partner, chief executive, etc) used in LLC for different persons, there may arrive confusion. The chaos may be as to which persons are carrying which authority and who can enter into commitment or act on behalf of LLC.
  • If the founder of the LLC wants to be a publically listed one, LLC is not suitable for him.
  • In some states, the members of the LLC may have to pay self-employment tax.

For more coverage on Disadvantages, please read our article on Disadvantages of Limited Liability Company

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Источник: https://efinancemanagement.com/financial-accounting/limited-liability-company

Public Limited Company is the legal designation of a limited liability company which has offered shares to the general public and has limited liability. The Company that is being constructed by a minimum of 7 people and maximum according to the shareholders with limited liability is called the public limited company.

A public limited company is a legal description of a limited liability company. This means that the public company grants limited responsibility to the owners and management.

The features of a public limited company are discussed below:

For the formation of such a company, there are some further legal procedures even after getting the letter of incorporation and certificate of commencement. For this reason, the formation of the public limited company is quite complex and time-consuming.

The first and main feature of Public Limited Company is that has a minimum of 7 members and maximum limit is restricted by the number of shares. If needed, the maximum number of members can be enhanced by correcting the memorandum of association.

This type of company is obligated to published prospectus or statement in lieu of prospectus and they are required to send this copy to the registrar. However, in the case of Private Limited Companies, the public is not invited to subscribe for the shares of the company.

The Company keeps on accessible in the eyes of law even in the case of death, insolvency, the economic failure of any of its members. This leads to the perpetual succession of the company.

The public limited company has than capital which refers to the fund’s arrangement by issuing shares in return for cash or other considerations. The amount of share capital of a company can change over time because each time a business sells new shares to the public in exchange for cash, the amount of that capital will increase.

  • Transferability of shares

Shares of the public limited company are purchased and sold in a stock exchange market. They are freely transferable between the members and people trading in the stock exchange.

This Company is also obligated to arrange a statutory board meeting, financial statements, audit, and inspection and send statements to the registrar, etc.

The Company has its own separate logo. The company is obligated to use this logo in its all types of operations and functions.

Shareholders’ liability for the losses of the company is limited to their share contribution only. This makes a separate legal entity from shareholders. The business can be sued on its own and not involve its shareholders. It means that if a company faces loss under any circumstances then its shareholders are liable to sell their own assets for payment. The personal, individual assets of the shareholders are not at risk.

Public limited companies are headed by a board of directors. Normally this comprises a minimum number of three members and a maximum of 12. They are elected by the shareholders during the annual general meeting. They act as the representatives of the shareholders in the management of the company.

As it is possible to enter into a public limited company by buying its shares. This is also possible to leave anytime by transferring those shares to others. So it is fully dependent on the will of the concerned people, for which it is to be said as a voluntary organization.

It is the amount receives by the company which is 90% of the shares issued within a certain period of time. If the company is not able to receive 90% of the amount then they cannot commence further business.

Analyzing the above-mentioned features, we get to know that it is the public limited company which falls under the definition of Joint Stock Company in a true sense. These features establish it as a real form of a Joint Stock Company.

Источник: https://qsstudy.com/business-studies/features-public-limited-company

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