LTD Business – A Company

Britain has a mixed economy, which means that some firms operate in the private sector whilst others are under direct state control, these being the nationalised industries. Many of these have been privatised in recent years, such as BT and British Gas.  There are three sectors within the economy:

  • The primary sector – where resources are extracted from the ground, e.g. mining, quarrying, drilling for oil, farming and fishing.
  • The secondary sector – where these primary products or raw materials are used to manufacture goods, e.g. electronics, steel, cars, clothes etc.
  • The tertiary sector – where services are provided, e.g. banking, retailing, advertising, tourism and so on, and also public services such as health, education, defence etc.

Businesses in the private sector vary in size from small start-up firms to large multinational corporations. Yet, despite this diversity

LTD Company

LTD Company

Most entrepreneurs operate as sole traders initially. This is the easiest way to start up, as no complicated legal formalities are involved. By definition, entrepreneurs are undertaking a risk in a new commercial venture. They have unlimited liability, which means that if the business fails, they may have to sell their home and personal possessions to pay outstanding bills. This is balanced by the fact that they keep any profits made and have complete freedom in decision making.

In time, sole traders may decide to form a partnership – a decision that is usually taken in order to raise more capital for expansion. In order to avoid disagreements, most partners draw up a formal partnership agreement. This includes details on, for instance, how much capital is contributed by each partner and the ratio in which profits and losses are to be shared.

As the business develops, further capital for expansion can be obtained by becoming a company and selling shares. Shares in private limited companies are not freely available to the general public and can only be transferred with the agreement of the directors. Shares in public limited companies, on the other hand, can be sold to the general public. Companies must have share capital of at least £50,000 before they can ‘go public’. Only public companies are able to have their shares on the Stock Exchange.

In becoming a company the business acquires a legal identity which is separate from the shareholders This means that it can be sued. Shareholders a have limited liability; if the business fails they are only responsible for an amount equivalent to the original investment.

Therefore anyone owed money by a company that goes into liquidation may never receive a penny. For this reason, a private limited company must have LTD after its name and a public limited company PLC after its name.

This makes it clear to its suppliers or any one else dealing with them, that their liability is limited. Every company must also place a copy of its accounts at companies house so that anyone can check whether the firm is financially sound.


No comments yet.

Leave a Comment

You must be logged in to post a comment.