Private limited Companies

These are closely held businesses usually by family, friends and relatives.

Private companies may issue stock and have shareholders. However, their shares do not trade on public exchanges and are not issued through an initial public offering.

Shareholders may not be able to sell their shares without the agreement of the other shareholders.

Advantages

• Limited Liability: 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.
• Continuity of existence: business not affected by the status of the owner.
• Minimum number of shareholders need to start the business are only2.
• More capital can be raised as the maximum number of shareholders allowed is 50.
• Scope of expansion is higher because easy to raise capital from financial institutions and the advantage of limited liability.

Disadvantages

• Growth may be limited because maximum shareholders allowed are only 50.
• The shares in a private limited company cannot be sold or transferred to anyone else without the agreement of other shareholders

Watch a Video