Private Company Public Company
Name must end with: Must end with Limited (or Ltd) Must end with Public Limited company
s.59(1)) (PLC) (s.58(1))
One - (s.7(1) and 8(1)) One - (s.7(1) and 8(1))
Minimum number of
shareholders:
One (s.154(1)) Two (s.154(2))
Minimum number of directors:
No (s.270(1))
Is a company secretary Yes (s.271)) - A public company secretary
required? must have the requisite knowledge and
experience s.273(2)
Certificate of Incorporation
Certificates required before (s15(4); Business can commence Certificate of Incorporation (s.15(4));
commencement of trading: as soon as it is incorporated
Business cannot commence until a trading
certificate is issued by a Registrar showing
that the company’s allotted shared capital is
not less than the minimum (s.761(1)(2))
Must have at least one
Minimum share capital to be share (s.8(1)(b)) Minimum of £50,000 (or the euro
issued equivalent) (s.763(1)(a)(b)
Prohibited (s.755(1)) Permitted (but Financial services (FSMA
Can it offer shares to the imposes restrictions)
public?
The main advantage public companies have
is their ability to tap the financial markets by
selling equity (or debt) to raise capital.
No restriction on method of
Method of payment and payment (s.582(1)) Payments in cash only or where
minimum amount payable for consideration has been independently
share capital Shares can be issued without valued (s.593(1))
immediate payment
25% of nominal value must be paid on
allotment plus the whole of any premium
(s.586(1))
Other Can use written resolutions Cannot use written resolutions
Restrictions on loan to directors is Restrictions on loan to directors are stricter
less strict (money directors
borrow from company) Prohibited from company providing ‘financial
assistance’ for the purchase of their own
Not prohibited from company shares (s.678(1))
, providing ‘financial assistance’ for
the purchase of their own shares Cannot purchase its own shares out of
under CA 2006 – (s.678(1)) capital
Can purchase its own shares out
of capital.
SGS 1 – SETTING UP A BUSINESS
PRIVATE VS PRIVATE
BUSINESS MEDIA
, BUSINESS MEDIA
Always consider:
o What the main elements of risk in the current proposed course of action are
o What the consequences if things do go wrong (i.e. the potential liabilities) are
o What strategies can be employed to reduce or minimise these risks and potential liabilities.
Definitions:
Incorporated businesses are separate legal entities. Examples include private limited company,
public limited company, limited liability partnership.
Unincorporated businesses are usually treated as being the same as the owner. Examples
include sole trader, partnerships.
SOLE TRADER
- A person who runs their own business as a self-employed person
- It can be one person who owns and runs the business but employs others
- The business has no legal entity of its own; it is unincorporated
- The sole trader is personally liable for all the debts of his business
PARTNERSHIP
- Two or more people owning and running a business together as partners
- Governed by the Partnership Act 1890
- Tax Transparent - Partnership is not itself liable to tax; Partners are taxable on their share of any
profits.
- The partnership has no separate legal status.
- Partners have unlimited liability, joint and several.
LIMITED LIABILITY PARTNERSHIP ('LLP') –
- Governed by Limited Liability Partnership Act 2000 and 2001 Regulations.
- Halfway point between a traditional partnership and a private limited company
- Flexibility of a partnership with the added advantage of limited liability for its members.
- For tax purposes, it is treated as a partnership thus tax transparent - s.118 ZA ICTA.
- LLP is a body corporate and is treated as a separate legal entity from its members > may own
property, enter into contracts, sue and be sued in its own name; partners of the LLP will not be held
personally liable for any business debts incurred by the LLP (s.74 Insolvency Act).
COMPANY LIMITED BY SHARES (An artificial legal person)
- Formed by completing formalities under the Companies Act 2006
- Limited liability for its owners ((s.3(1) CA))
- Company has a separate legal personality
- Directors run the company on a daily basis.
- The shareholders, who own the company, usually only get involved in the most important decisions.
, SOLE TRADER COMPANY LIMITED PARTNERSHIP LIMITED LIABILITY
BY SHARES PARTNERSHIP
Governing No Statute Companies Act Partnership Act Limited Liability
statute 2006 (CA 2006) 1980 Partnership Act 2000
(LLPA) and a series of
LLP Regulations
Unlimited Shareholders Partners have
Liability of personal liability is limited to unlimited personal The liability of the
investors liability the amount, if any, liability on either a members of an LLP to
is unpaid on their joint, or a joint and third parties is limited to
shares (s.3(2)) several, basis the amount that they
determined by the have agreed to pay
nature of the under the terms of their
liability. partnership agreement.
Not a Not a separate Separate legal entity -
Legal status separate Separate legal legal entity – each the LLP may therefore
of the legal entity – entity from that of partner is own property, enter into
business Sole trader its owners -The individually contracts, sue and be
medium is company may own responsible sued in its own name.
individually property, enter into
responsible contracts, sue and
be sued in its own
name.
Min/max one Minimum one- Minimum of two Minimum of two
Number of person (s.7(1))
persons
needed to
set up the
business
None necessary; Incorporation document
Expenses No Higher setup costs although highly required
before or due formalities; in dealing with recommended to
on start-up no expenses company’s have a partnership Registration Fee
necessary constitutional agreement drawn
documents. up by lawyers Recommended LLP
(expensive) agreement drawn up
Incorporation
documents required Generally, the Act Printing of LLP
include: aims for equality stationary
memorandum and between partners
articles of (create a
association partnership
(recommended agreement to
lawyer involvement) override elements
of the Act)
Registration Fees
Name must end with: Must end with Limited (or Ltd) Must end with Public Limited company
s.59(1)) (PLC) (s.58(1))
One - (s.7(1) and 8(1)) One - (s.7(1) and 8(1))
Minimum number of
shareholders:
One (s.154(1)) Two (s.154(2))
Minimum number of directors:
No (s.270(1))
Is a company secretary Yes (s.271)) - A public company secretary
required? must have the requisite knowledge and
experience s.273(2)
Certificate of Incorporation
Certificates required before (s15(4); Business can commence Certificate of Incorporation (s.15(4));
commencement of trading: as soon as it is incorporated
Business cannot commence until a trading
certificate is issued by a Registrar showing
that the company’s allotted shared capital is
not less than the minimum (s.761(1)(2))
Must have at least one
Minimum share capital to be share (s.8(1)(b)) Minimum of £50,000 (or the euro
issued equivalent) (s.763(1)(a)(b)
Prohibited (s.755(1)) Permitted (but Financial services (FSMA
Can it offer shares to the imposes restrictions)
public?
The main advantage public companies have
is their ability to tap the financial markets by
selling equity (or debt) to raise capital.
No restriction on method of
Method of payment and payment (s.582(1)) Payments in cash only or where
minimum amount payable for consideration has been independently
share capital Shares can be issued without valued (s.593(1))
immediate payment
25% of nominal value must be paid on
allotment plus the whole of any premium
(s.586(1))
Other Can use written resolutions Cannot use written resolutions
Restrictions on loan to directors is Restrictions on loan to directors are stricter
less strict (money directors
borrow from company) Prohibited from company providing ‘financial
assistance’ for the purchase of their own
Not prohibited from company shares (s.678(1))
, providing ‘financial assistance’ for
the purchase of their own shares Cannot purchase its own shares out of
under CA 2006 – (s.678(1)) capital
Can purchase its own shares out
of capital.
SGS 1 – SETTING UP A BUSINESS
PRIVATE VS PRIVATE
BUSINESS MEDIA
, BUSINESS MEDIA
Always consider:
o What the main elements of risk in the current proposed course of action are
o What the consequences if things do go wrong (i.e. the potential liabilities) are
o What strategies can be employed to reduce or minimise these risks and potential liabilities.
Definitions:
Incorporated businesses are separate legal entities. Examples include private limited company,
public limited company, limited liability partnership.
Unincorporated businesses are usually treated as being the same as the owner. Examples
include sole trader, partnerships.
SOLE TRADER
- A person who runs their own business as a self-employed person
- It can be one person who owns and runs the business but employs others
- The business has no legal entity of its own; it is unincorporated
- The sole trader is personally liable for all the debts of his business
PARTNERSHIP
- Two or more people owning and running a business together as partners
- Governed by the Partnership Act 1890
- Tax Transparent - Partnership is not itself liable to tax; Partners are taxable on their share of any
profits.
- The partnership has no separate legal status.
- Partners have unlimited liability, joint and several.
LIMITED LIABILITY PARTNERSHIP ('LLP') –
- Governed by Limited Liability Partnership Act 2000 and 2001 Regulations.
- Halfway point between a traditional partnership and a private limited company
- Flexibility of a partnership with the added advantage of limited liability for its members.
- For tax purposes, it is treated as a partnership thus tax transparent - s.118 ZA ICTA.
- LLP is a body corporate and is treated as a separate legal entity from its members > may own
property, enter into contracts, sue and be sued in its own name; partners of the LLP will not be held
personally liable for any business debts incurred by the LLP (s.74 Insolvency Act).
COMPANY LIMITED BY SHARES (An artificial legal person)
- Formed by completing formalities under the Companies Act 2006
- Limited liability for its owners ((s.3(1) CA))
- Company has a separate legal personality
- Directors run the company on a daily basis.
- The shareholders, who own the company, usually only get involved in the most important decisions.
, SOLE TRADER COMPANY LIMITED PARTNERSHIP LIMITED LIABILITY
BY SHARES PARTNERSHIP
Governing No Statute Companies Act Partnership Act Limited Liability
statute 2006 (CA 2006) 1980 Partnership Act 2000
(LLPA) and a series of
LLP Regulations
Unlimited Shareholders Partners have
Liability of personal liability is limited to unlimited personal The liability of the
investors liability the amount, if any, liability on either a members of an LLP to
is unpaid on their joint, or a joint and third parties is limited to
shares (s.3(2)) several, basis the amount that they
determined by the have agreed to pay
nature of the under the terms of their
liability. partnership agreement.
Not a Not a separate Separate legal entity -
Legal status separate Separate legal legal entity – each the LLP may therefore
of the legal entity – entity from that of partner is own property, enter into
business Sole trader its owners -The individually contracts, sue and be
medium is company may own responsible sued in its own name.
individually property, enter into
responsible contracts, sue and
be sued in its own
name.
Min/max one Minimum one- Minimum of two Minimum of two
Number of person (s.7(1))
persons
needed to
set up the
business
None necessary; Incorporation document
Expenses No Higher setup costs although highly required
before or due formalities; in dealing with recommended to
on start-up no expenses company’s have a partnership Registration Fee
necessary constitutional agreement drawn
documents. up by lawyers Recommended LLP
(expensive) agreement drawn up
Incorporation
documents required Generally, the Act Printing of LLP
include: aims for equality stationary
memorandum and between partners
articles of (create a
association partnership
(recommended agreement to
lawyer involvement) override elements
of the Act)
Registration Fees
