Forming a Private Limited Company Forms of Business Ownership
What is a Private Limited Company? A private limited company is where between one and ninety nine people come together and form a business The owners are called shareholders and they invest money in the company The profit is divided up among the shareholders and distributed in the form of dividends “Ltd. ” is written after the name of the company The annual accounts are sent to the Registrar of Companies. They are not published
Advantages of a Private Limited Company Shareholders have limited liability Extra capital is available to fund expansion of the business Continuity of existence
Disadvantages of a Private Limited Company Costly to set up A lot of legal requirements when forming a company Shares cannot be transferred to the general public
Forming a Private Limited Company Promoters Hire… Solicitor Promoters Who completes… Form A 1 Memorandum of Association Articles of Association Now the company can begin trading Certificate of Incorporation Sent to… Companies Registration Office (CRO)
Shareholders The owners of the company (1 -99) Elect… Board of Directors Appoint… IT Manager The people elected to run the company (max. 12) The MD/CEO runs the Managing Director/ company on a daily basis with Chief Executive Officer the assistance of the department managers Marketing Manager Finance Manager Production Manager
Forming a Private Limited Company You need 1 – 99 people who invest money and are shareholders The people involved in forming a company are called the promoters The promoters employ: l l An accountant – for financial advice A solicitor – to prepare the legal documents which must be sent to the Companies Registration Office (CRO)
What documents must be filled out? Memorandum of Association – sets out the relationship of the company to the general public, i. e. rules and regulations governing how the company deals with the public Articles of Association – sets out the internal rules and regulations of the company, e. g. shareholders voting rights, how directors are elected, powers and duties of the directors Form A 1 – sets out the details of the company, it’s directors and their signatures (Declaration of Compliance with the Companies Acts 1963 – 1990)
These documents are sent to the Registrar of Companies The Registrar will check to see if they are all in order If so, a Certificate of Incorporation is issued l l This is the birth certificate of a company It has a separate legal existence from its owners The shareholders have limited liability The company can sue and be sued in its own name
Memorandum of Association Articles of Association Form A 1
Board of Directors When the company is incorporated it will hold a meeting of its shareholders who elect a board of directors to run the company on a day-to-day basis They report to the shareholders annually on the performance of the company at the Annual General Meeting (AGM)
Summary What is a private limited company? How do you know if a business is a private limited company? Can you list three advantages and three disadvantages of operating as a private limited company? What documents are needed to form a private limited company? What is the certificate of incorporation? What do the board of directors do? What is an AGM?
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