Private Limited Companies (Ltd)

There are many more private limited companies than public limited companies. Private (closed) companies cannot sell shares to or raise money from the general public (which they usually do through a stock ex­change). If one of the shareholders decides to sell stock, it is usually sold to one or the other shareholders or someone of whom they all approve. In this way, the ownership of the business is selective and controlled.

British laws specify that such a company may have up to 50 shareholders. There is no minimum amount of share capital for it, and it’s theoretically possible for a plc to have just one share held by one person. Private limited companies are often local family businesses and are common in the building, retailing and clothing industries. A private company can be formed with a minimum of two people becoming its shareholders. Such a company has Ltd (Limited) after its name.

Many large businesses in the UK are Public Limit­ed Companies (PLC): Marks & Spencer, British Telecom and the National West­minster Bank are the examples of public limited com­panies. In the US, businesses take the same basic forms. American companies have abbreviations Inc and Corp.

Other types of companies are:

1) Associated company, which is a company over which another company has substantial influence; for example it owns between 20 per cent and 50 per cent of its shares.

2) Holding company, a company that owns another company or other companies and which is sometimes referred to as the parent company (most public com­panies operate through a number of companies con­trolled by the group's holding company);

3) Subsidiary company, a company controlled by a holding company, usually because the holding compa­ny owns (or indirectly owns through another subsidi­ary) more than 50 per cent of the subsidiary compa­ny's shares.

In certain countries, notably in Britain, there is a trend towards privatization of the public sector companies owned by the government (post offices, railway and telephone companies). They are sold back to the private sector. It is positive because these companies may find themselves in competition with other firms and thus make their services more efficient and beneficial for customers; the money raised by them can be used to reduce taxes. It is negative because the private sector companies are mainly interested in making a profit, some services may become more expensive for customers; necessary services may not be provided because they are not profitable.

Companies in the public sector have certain similarities to public limited companies. However there are a few important differences:

· while plcs are owned by the public, public sector companies are owned by the government;

· the chairman of a plc is chosen by the shareholders, whereas the chairman of a public sector company is chosen by the government;

· a plc obtains capital by selling shares, a public sector company by selling stocks;

· the profits earned by a plc go to the shareholders, the profits of a public sector company go to the government;

· the main objective of a plc is to make the largest possible profit, public sector companies are created to provide the public with essential services.

Date: 2015-12-11; view: 1032