A company limited by shares refers to a company which issues shares to the public. Such companies are called limited companies in India and public limited company (PLC) in the commonwealth countries and Great Britain. … The shares of a company limited by shares are generally listed on the stock exchange.
A share is a piece of a company limited by shares. Each piece represents a certain percentage of the company. Anyone who owns shares in a limited company is called a ‘shareholder’ or ‘member’. The number of shares held by each member determines how much of the company they own and control.
In a company limited by shares, the shareholders’ liability is limited to the amount the shareholder has agreed to pay for his or her shares. In a company limited by guarantee, the liability is limited to the amount of the guarantee set out in the company’s articles, which is typically just £1.
The main advantage of a private company limited by shares is the limited liability of its shareholders. During the recent recession, many businesses experienced financial contraints which affected their performance and solvency.
Why is a company limited?
Filing as a limited company comes with a number of benefits. … A limited company structure provides a firewall between the finances of the company and its owners. A limited company is allowed to own assets and retain any profits made after-tax. A limited company can enter into contracts on its own.
Any person or corporate body can own a company limited by shares. The owners are known as ‘shareholders’, ‘members’ or ‘subscribers’ and they will appoint directors to run the day-to-day activities of the company. In many cases, the shareholders will also be directors in their company.
Limited companies can issue more shares at any point after incorporation. Likewise, shareholders (members) can transfer or sell their company shares to other people at any time.
There is no requirement for directors to also be shareholders, and shareholders do not automatically have the right to be directors. However, in most private limited companies, they are the same people. This flexibility in ownership and management is one of the many great things about the limited company structure.
Profits made by limited by shares companies are often distributed to their members (shareholders) in the form of cash dividend payments. Dividends are issued to all members whose shares provide dividend rights, which most do.