Limited liability – this means that in the case of dissolution

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. 


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