Private Limited Company - Advantages and Disadvantages

The shareholders elect directors at the companies AGM (Annual General Meeting), who controls the company. Policies are decided by the board of directors, and are carried out by delegation. Shares must be owned by friends, families and employees of the company and are unable to float their shares via the stock exchange. There must be a minimum of one shareholder and at least one director.

        To set up a business such as a LTD (Private Limited Company), one must register with the registrar of companies at Dublin’s castle. A Memorandum of Association must be prepared which establishes the company and determines the objects the business, which it is to conduct. Additionally, the Articles of Association must be prepared, which contains the internal constraints governing the conduct if the company as between the shareholders and the board of directors of the company. Furthermore, a Statutory Declaration must be signed which states the company agrees to act upon the company acts and their requirements. Once these documents have been lodged with the registrar and accepted, a certificate of incorporation is issued and the company may begin trading under the title LTD.

Fig. Setting up a limited company

Advantages

• Face limited liability.

• Better access to outside finance e.g. issuing shares.

• Able to continue trading even after the resignation or death of a member as the company has a separate legal identity of it own.

• If you are expecting large profits from your business, being a LTD company may provide more advantageous tax treatment.

• The Companies Act provides a standard and convenient management structure for you to follow.

• Able to gain tighter control of your company as you decide whom you issue shares to.

• A LTD has a greater status than of a sole trader or a partnership.

Disadvantages

• The legal requirements, which have to be met before you can operate the business, are quite complex and lengthy.

• Annual accounts must be audited by the company’s house, which could be costly and time consuming to prepare.

• The public have access to your companies annual reports therefore you have less business privacy.