A limited company has several advantages, such as:
- Limited liability: the liability of the shareholders for the company is limited to the amount of their respective shareholdings. If the company collects a lot of debt and is unable to pay it back, they may wound up the shareholders so that the assets owed by the company will be paid off.
- Perpetual Succession: Any change of shareholders will not affect the existence of the company. A company has a two-tier structure; it is owned by the shareholders, but managed by the directors. If a shareholder is no longer interested in the company, he can sell his shares by transferring them to another person. This will not affect the operation of the company. For a small private limited company, the two-tier structure usually does not even exist. The shareholders are often the directors of the company. Therefore, a transfer of shares may affect the management personnel as well.
- Finance: A company can create finance by making a “floating charge”. This means that a company can use its assets as collateral for a bank loan. Also, this means that if the company was to default on their loan, the bank could seize their assets as collateral.
- Ownership: Each business is treated as separate entity under the law. This means that it can own property in its name, own its name, and take legal actions against other persons/entities.
- Management: a company has the separation of ownership and management. This means that the shareholders are the owners of the company. In addition the directors are the management personnel of the company. The shareholders have limited liability and can help in appointing management and business experts. This in order to aid in the conducting of the company as directors.Last, we hope this information was usefull.