Limited Companies Flashcards Preview

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Flashcards in Limited Companies Deck (18):
1

What does LTD stand for?

Private Limited Company

2

What does PLC stand for?

Public Limited Company

3

Who owns limited companies?

The shareholders.

4

Who controls limited companies?

The board of directors.

5

Who manages limited companies?

The appointed managers.

6

How is finance raised in limited companies?

Finance is raised by selling shares and borrowing from banks.

7

Who does the profit go to in limited companies?

The profit goes to the shareholders in the form of dividends.

8

What does dividends mean?

Dividends is the shareholders share of profits earned by an organisation.

9

What are the people who invest money in a company by buying shares called?

Shareholders.

10

What documents must a LTD and a PLC produce to set up?

- Memorandum of Association
- Articles of Association

11

What must the documents be registered with?

The documents must be registered with Registrar of Companies who grants a Certificate of Incorporation, allowing the company to conduct business.

12

What is a Memorandum of Association?

A document setting out the relationship between an organisation and the outside world. For example, the name of the company, where its address is etc.

13

What is an Article of Association?

A document setting out the details of the internal relationships that exist within the company. For example, when company meetings will be held, how directors will be chosen etc.

14

What must companies do every year?

- Produce a report and a set of account for the shareholders. (The annual reports and accounts must include a balance sheet, profit and loss account, a cash flow statement and a director's report).
- Hold an Annual General Meeting (AGM) where shareholders are informed about the company's performance during the previous financial year.

15

What are the advantages of a LTD?

- Shareholders have limited liability.
- Specialist managers can be employed.
- Money can be raised from selling shares to family and friends.
- It is easier to expand the business.
- There is no minimum investment needed before the company can start trading.

16

What are the disadvantages of a LTD?

- They cannot sell shares on the stock market.
- Annual reports have to be produced by law.
- Expensive administrative work is required to set up a company.
- They can only sell shares to family and friends.
- Transfer of shares must be agreed by the directors.

17

What are the advantages of a PLC?

- Shareholders have limited liability.
- Shares can be sold to the general public through the stock exchange.
- It benefits from economies of scale.
- Specialist managers can be employed.
- It is easier to expand the company.
- It is easy to raise finance from banks.
- There is no restriction on the transfer of shares.

18

What are the disadvantages of a PLC?

- Expensive administrative work is required to set up a company.
- Annual reports have to be produced and published by law and this is an expensive process.
- Conflict of interest can arise between managers and owners.
- Dis economies of scale because of size.
- Decision making process can be slow.
- The minimum initial shares capital of £50,000 is needed before the company can start trading.