In other words a company has as many rights and responsibilities that a genuine person would have, apart from one exception this being those created by the Registrar Of Companies.

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“A Limited Company is an artificial legal person” P, Atrill, & E, Mclaney, Accounting and Finance for Non- specialists, Third Edition, p85.

In other words a company has as many rights and responsibilities that a genuine person would have, apart from one exception this being those created by the Registrar Of Companies.

There are two types of company there is the private company and the public company.  A Public Company (PLC) is defined as “ one whose memorandum states that the company is a public company, and has registered as such” F, Wood, Business Accounting, Fifth Edition, P355.  It must have a minimum of two members, and there is no limit to how many can join, and the company must have an authorised capital, which is normally at least £50,000.  A Private Company (Ltd) may be formed by two or more people, a family or a small group of shareholders could own it, where the shares of ownership are not sold to the public.  Shares basically limit the company, and this is where the liability of the members for the debts of the company is limited to how much they invest into it.  The creditors can charge no further contribution from the shareholders to meet their claims against the business, and that there liability is limited by guarantee.  

Limited Companies are required to have their books and annual final accounts audited by an independent qualified accountant.  The annual report contains a profit and loss account, a balance sheet, and much other information.  The auditor’s job is to make sure “ The balance sheet shall give a true and fair view of the state of affairs of the company as at the end of its financial year; and the profit and loss account shall a give true and fair view of the profit or loss of the company for the financial year” (Companies Act 1985 section 228(2)). R, J, Bull, Accounting In Business, Sixth Edition, P190.  A copy of these published accounts must be then be filed away for public inspection at the company’s house, and a copy sent to each ordinary shareholder.   

A Partnership does not have to disclose any information about itself to the public, so there is no need to protect them.  

A, Pizzay, Accounting and Finance, Third Edition, p, 326… ”Partnerships are not able to limit their liability, so each partner may be made liable for the debts of the firm to the full extent of his private fortune”.  This simply means that the failure of the business could have effect on a partner losing, both his share of the business assets, and also part or all of his private assets as well.    

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The reasons why the companies acts place these requirements on a Limited Company (Ltd) is because it’s a much larger company compared to a Partnership, and has more responsibilities.  Even though the shareholders are not that involved with the day to day running of the business, they appoint directors who have more power to run the company.  This is why the reports have to be completed with a lot of detail, so the shareholders can read up on how the business is running.

Most of the firms in the UK are limited companies, this is because Sole Traders and ...

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