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1.
Limited liability – this means that in the case
of dissolution, if the company is in debt, the owners have to be liable only up
to the amount of shares they’ve bought of the company. On the other hand unlimited
liability, the owner’s liabilities does not limit to their shares but to their
personal property as well.
Legal personality- in the case of
any action against the organization, the company’s name will be plaintiffs. Not
the separate individuals. (owners) no legal personality means that the separate
individuals must be defendants in any action by or against the organization.
2.
Types of private sector business org in sri
lanka. –
·
Sole ownership-
1.
ownership is to a single person.
2.
Unlimited liability
3.
No separate legal personality
·
Partnerships –
1.
Ownership is divided among the partners. (2-20)
2.
Unlimited liability
3.
No separate legal personality.
4.
The business does not have a continuity.
·
Limited liability companies- Private
1.
Limited Liability
2.
The ownership is among the family members.
3.
Separate legal entity, continuity.
·
Limited liability companies – public
1.
There is limited liability for the shareholders.
2.
The business has separate legal entity. There is
continuity even if any of the shareholders die.
3.
These businesses can raise large capital sum as
there is no limit to the number of shareholders.
4.
The shares of the business are freely
transferable providing more liquidity to its shareholders
5.
Why did we choose our organization to be a
private limited company?
These are closely held businesses usually by family, friends
and relatives. Private companies may issue stock and have shareholders.
However, their shares do not trade on public exchanges and are not issued
through an initial public offering. Shareholders may not be able to sell their
shares without the agreement of the other shareholders.
Advantages
Limited Liability: It means that if the company experience
financial distress because of normal business activity, the personal assets of
shareholders will not be at risk of being seized by creditors.
Continuity of existence: business not affected by the status
of the owner.
Minimum number of shareholders need to start the business
are only2.
More capital can be raised as the maximum number of
shareholders allowed is 50.
Scope of expansion is higher because easy to raise capital
from financial institutions and the advantage of limited liability.
Disadvantages
Growth may be limited because maximum shareholders allowed
are only 50.
The shares in a private limited company cannot be sold or
transferred to anyone else without the agreement of other shareholders
o
We choose our organization as a private limited
because we preferd to keep the ownership knitted around the family since this
is a family business.
o
Another reason is that we can have a limited
liability. So we can assure that the owners private property will not be liable
to any debt.
o
The fact that private limited companies are very
restricted and safe. the business is more protective.
o
There is a separate legal entity.
