Lesson 2, Topic 2
Private Limited Liability Company
A Private Limited Liability Company is established by a particular set of people (2 to 50) with limited liability. They are not allowed to sell their shares to the public except for private placement.
Features of a Private Limited Liability Company
- The membership of participant: Members or owners are from two to fifty
- Governed by memorandum and article of associations.
- The business has a separate legal entity
- The shareholders have limited liability
- There is continuity of business operation
- There is a board of directors
- Raising of capital is through the issuing of shares
- Shares are not easily transferable
- It cannot request the public to subscribe for bonds or debentures.
Advantages of Private Limited Liability Company
- They raise capital more easily than a partnership
- They are not liable for the payment of debts. Shareholders have limited liability
- It has a separate legal entity.
- The business enjoys internal economies of large-scale production. Since the business is large, production can be carried out on a large-scale.
- The business has greater continuity.
Disadvantages of Private Limited Liability Companies
- The amount of capital for the business is not as large as that of public companies.
- A private limited liability company cannot advertise its shares publicly or sell them directly to the public.
- The shares of a private liability company cannot be easily transferred.
- There is personal contact with the employee and customers.
- There is a delay in decisions making.
- Public cannot be invited for subscription of shares, bonds or debentures.