LIMITED LIABILITY COMPANY

YEAR 8

Lesson Objectives

1. Students will be able to define a private limited company.

2. Students will be able to describe the characteristics of a private limited company.

3. Students will be able to explain advantages and disadvantages of a private limited company.

SUCCESS CRITERIA• All students will be able to

define private and public limited companies.

• Most students will be able to describe the characteristics of private and public limited companies.

• Some students will be able to explain advantages and disadvantages of private and public limited companies.

DO NOW Write in a minute what you would do if you won a

lottery? How would you

use the money?

STARTER

Name five companies which names end with Plc.

LIMITED LIABILITY

Type of investment in which an investor cannot lose more than the amount invested.

LIMITED LIABILITY COMPANY - MEANING

A corporate structure whereby the members of the company cannot be held personally liable for the company's debts or liabilities.

Class Activity

Why is ‘limited liability’ important to an investor?

Characteristics of a Private Limited Company• Closely held businesses usually by family, friends and relatives.• Private companies may issue stocks and have shareholders. • 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.

Class ActivityHow is a private limited liability company different from a partnership?

Advantages of a Private Limited Liability Company

• Limited Liability: It means that if the company experiences 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 of a Private Limited Company

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

Class ActivityWhat can be done to solve the problems of a private limited company?

HOME WORK

What encourages people to buy shares in the ownership of a private limited company? (10marks)

Due Date: 24/09/14Helpline:rojowater05@yahoo.com

• Knowledge 1 – 4 marks• Application 4 – 6 marks

Lesson 2

PUBLIC LIMITED LIABILITY COMPANY

PUBLIC LIMITED LIABILITY COMPANY

PUBLIC LIMITED LIABILITY COMPANY

Lesson Objectives

1. Students will be able to define a public limited company.

2. Students will be able to describe the characteristics of a public limited company.

3. Students will be able to explain advantages and disadvantages of a public limited company.

Success Criteria

• All students will be able to define a public limited companies.

• Most students will be able to describe the characteristics of a public limited company. • Some students will be able to explain advantages and disadvantages of a public limited company.

PUBLIC LIMITED LIABILITY COMPANY

A company whose securities are traded on a stock exchange and can be bought and sold by anyone. Public companies are strictly regulated, and are required by law to publish their complete and true financial position so that investors can determine the true worth of its stock (shares).

Characteristics of a Public Limited Liability Company

• Minimum of two shareholders

• Shareholders own the company and receive profits

• Shares can be sold publicly on the stock market

• Shareholders cannot be sued

• Limited liability• Holds AGMs• Directors run the company

CLASS ACTIVITY

CLASS ACTIVITY

Why is it likely to be easier for a public limited company to raise capital than a private limited company?

Advantages of a Public Limited Liability Company

• There is limited liability for the shareholders.

• The business has a separate legal entity. There is continuity even if any of the shareholders die.

• These businesses can raise large capital sum as there is no limit to the number of shareholders.

• The shares of the business are freely transferable providing more liquidity to its shareholders .

Disadvantages of a Public Limited Liability Company

• There is limited liability for the shareholders.

• The business has separate legal entity. There is continuity even if any of the shareholders die.

• These businesses can raise large capital sum as there is no limit to the number of shareholders.

• The shares of the business are freely transferable providing more liquidity to its shareholders .

Home work

• Explain 2 similarities and 3 differences between private and public limited companies.

Assessment criteria:• 1 mark for each point identified.• 1 mark for further explanation of the point identified.

Due Date: 26/09/14Helpline: rojowater05@yahoo.com