Advantages And Disadvantages Of Limited Company

Company limited by guarantee are organisations which are registered with a company house and are found more within organisations that are of a larger size and have their own buildings, employ their own staff and have significant contracts or other responsibilities. These companies have a legal right of their own, which means that any agreements or contracts made with that certain company are held within the name of the company, however this limits financial liability.

Limited liability means it does not exceed the amount invested in a partnership or limited liability company. The limited liability feature is one of the biggest advantages of investing in publicly listed companies. While a shareholder can participate wholly in the growth of a company, his or her liability is restricted to the

This essay will explain the concepts of separate personality and limited liability and their significance in company law. The principle of separate personality is defined in the Companies Act 2006(CA) ; “subscribers to the memorandum, together with such other persons as may from time to time become members of the company are a body corporate by the name contained in memorandum.” This essentially means that a company is a separate legal personality to its members and therefore can itself be sued and enter into contracts. This theory was birthed into company law through the case of Salomon v Salomon and Co LTD 1872. This case involved a company entering liquidation and the unsecured creditors not being able to claim assets to compensate them. The issue in this case was whether Mr Salomon owed the money or the company did. In the end, the House of Lords held that the company was not an agent of Mr Salomon and so the debts were that of the company thus creating the “corporate Veil” .

In case of breach of contract liability shall be limited or unlimited depending on the type of activity. There are five types of business organizations in the United States. These forms are sole proprietorship, a partnership, limited liability company, partnership, and limited liability company. Each of these formations business has advantages and disadvantages for the employer. There are different levels attributed to the owners and partners in each of these forms of business organization responsibility. As for the different levels of responsibility that owners and partners can help in selecting the appropriate form

* Limited Liability - Unlike partnerships and sole proprietorships, corporate shareholders are not liable for any of the corporation's debts.

A shareholder in a limited company is not personally responsible for any of the debts of Tesco, other than for the value of his investment in Tesco. Although a shareholder's liability for Tesco's actions is limited, the shareholder may still be liable for its own acts. For example, the directors of small companies, who are frequently also shareholders, are often required to give personal guarantees of the company's debts to those lending to the company. They will then be liable for those debts in the event that the company cannot pay, although the other shareholders will not be so liable.

Owners are not personally responsible for debts the business may accumulate. The ownership of a limited company is divided up into equal parts called shares (Bbc.co.uk, 2014).

Firstly, being a public limited company restricts the liability of shareholders to only their shares. This means that shareholders cannot lose more money than they

Choosing a Corporation/Company Structure - the business structure of a company/ corporation is highly recommended, it has the flexibility to gain more capital, or credit capability and assets used as security. Based on the Corporation Act 2001 (Cth) AC 22, a corporation is another legal entity with their own legal rights, duties and responsibilities separate to the individual or owner of the company (Harris, Hargovan & Adams, 2013, pp 229). The risk and consequences are one of the principal considerations of choosing a company structure (Harris, Hargovan & Adams, pp 50). Based on the “Corporate Veil” Liability is owned by a separate legal entity and not to the extent of the owner, for instance, the debt of the company is not a personal liability, but the company. This is further explained in the case below.

Due to limited liability, company creditors’ interests are not protected . Creditors need to bear the risks inherent when dealing with limited company. Shareholders are discouraged from monitoring and controlling the business due to the benefits of limited liability.

Limited liability Company (LLC): Business’ owners are only subject to limited liability for company’s debts and actions. Owners will be only liable for their own mistakes or negligence that they may show in occasions.

When a company is incorporated it is treated as a separate legal entity distinct from its promoters, directors, members, and employees, which confers the benefit of not being responsible for the companies debt on the members on the company. However even though a company is a separate legal entity and it attains the advantage of not laying the responsibility of company’s debt on the

Pursuant to Section 45(1) of Companies Act 2016, a company limited by guarantee can formed for several objects such as promoting charity, commerce and industry, religion or useful objects for the country or community like social, education, sports, environment and any other categories which is acceptable by Minister. Companies limited by guarantee as a public company incorporated under Malaysian Companies Act 2016 which pursue beneficial purposes to the community as well as prohibits payment of dividends to its members of the company. The company made up with the principle of having liability of its members that limited by the constitution to the respective amounts that the members responsibly undertake to contribute to the company’s property in the event of it being wound up. Companies limited by guarantee shall not form as a company with a share capital which is a non-profit organization that not involving in any activity that benefits either the company or its members while at the same time the members have no obligation to contribute capital for the operation of the company.

In this task, I will be evaluating the advantages and disadvantages of s partnership and private limited company. How majority shareholders protect their interests on the board of directors. Clarifying the rights and duties of a company director and how one is appointed to being a manager director. In addition the rights and duties of company auditor as well as their liabilities as an auditor.

Corporation origin from the Latin word Corpus which means body. It is formed by a group of people and has separate rights and liability from those individual. In any means, corporation exists independently from its owner and this principle is called the doctrine of separate personality. Doctrine of separate personality is the basic and fundamental principle in a Company Law. This principle outline the legal relationship between company and its members. Company’s assets belong to the company not the shareholders as assets are the equity for creditors. Company must use up all its assets to pay off the creditors if it became insolvent. The same applies to the corporation’s debts. For limited liabilities company, the shareholder liability is limited which means that the shareholder is restricted to the number of shares they paid and not personally liable for the corporation’s debts. If the company does not have enough equity to pay off debts, the creditors cannot come after the shareholders. However, limited liability company can be very powerful when in hands who do fraud and on defeating creditors’ claims. Courts then can ignore the doctrine for exception cases and lifting the corporate veil. Lifting the corporate veil is a situation where courts put aside limited liability and hold a corporation’s shareholders or directors personally liable for the corporation’s debts.