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SS1: ECONOMICS - 2ND TERM

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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

  1. The membership of participant: Members or owners are from two to fifty
  2.  Governed by memorandum and article of associations.
  3. The business has a separate legal entity
  4. The shareholders have limited liability
  5. There is continuity of business operation
  6. There is a board of directors 
  7. Raising of capital is through the issuing of shares
  8. Shares are not easily transferable
  9. It cannot request the public to subscribe for bonds or debentures.

Advantages of Private Limited Liability Company

  1. They raise capital more easily than a partnership
  2. They are not liable for the payment of debts. Shareholders have limited liability
  3. It has a separate legal entity.
  4. The business enjoys internal economies of large-scale production. Since the business is large, production can be carried out on a large-scale. 
  5. The business has greater continuity.

Disadvantages of Private Limited Liability Companies

  1. The amount of capital for the business is not as large as that of public companies.
  2. A private limited liability company cannot advertise its shares publicly or sell them directly to the public.
  3. The shares of a private liability company cannot be easily transferred. 
  4. There is personal contact with the employee and customers.
  5. There is a delay in decisions making.
  6. Public cannot be invited for subscription of shares, bonds or debentures.

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