Limited companies
Also known as Joint stock companies. These are businesses where a number of owner(shareholder) pool in their resources to do a common business and to share the profits and losses proportionally.
In a limited company, the debts of the company are separate from those of the shareholders. As a result, should the company experience financial distress because of normal business activity, the personal assets of shareholders will not be at risk of being seized by creditors. Ownership in the limited company can be easily transferred, and many of these companies have been passed down through generations.
Difference between Limited companies and partnership
- Limited companies can issue shares whereas partnership business cannot.
- Shareholders enjoy limited liability in Limited companies. It means that if the company experience financial distress because of normal business activity, the personal assets of shareholders will not be at risk of being seized by creditors. Whereas partnership business does not have limited liability except for limited partnerships.
- Separate Identity: Limited companies are considered as human beings in the eyes of the law. They are born and die in the eyes of law. They can sue and get sued on their own name.
- Continuity: There is continuity of existence in limited companies and are their existence is not affected by the death, bankruptcy
- or sickness of their owner. This is not the case in Partnership or sole trader
- businesses.
There are two main types of Limited companies.
- Public Limited Companies
- Private Limited Companies