Running a business

Certain very large companies are registered as public limited companies (PLC). They raise capital by selling shares to the general public, and these shares are listed on the Stock Exchange.

Selling shares is one of the ways in which companies raise capital; A share is ownership of a proportion of the company, and thus the right to a proportion of any profit it makes (dividend). Shareholders cannot insist on the payment of a dividend every year since this is up to the directors to decide. But if they are dissatisfied with the management of the company as members they have the right to remove the directors. The more shares a member holds, the more voting rights he will have in general meetings. Shares may be acquired when the company is first set up; or at a later share issue. Or they may be bought or received from an existing shareholder. Sometimes a company gives existing members the right to buy shares from another member before he is allowed to sell them to a new member. Each share is equal in value. But that value may be greater or less than the nominal value. For example, a member of a successful company who bought shares at S10 each may be able to sell them at a premium -perhaps $12 each. But he may also find that he has to sell them for less than their nominal value - at a discount.

Another way for a company to raise capital is by issuing debentures, or bonds in return for loans. Debenture holders are entitled to an annual payment of interest, and it is not linked to the company's profits and losses. In general they have the right to sell their debentures back to the company or sell them on to someone else. If possible, the lender will make sure his loan is secured by a charge over a company asset, so that he will have the right to take company property should there be no money to repay him.

A limited liability company is not the only way to run a business. A single person may operate as a sole trader, and even if he employs many people, he alone is responsible for management and, thus, for any debts. Another way to run a business is for two or more people to form a partnership in which they share management, profits and liability to debts. The share is not necessarily an equal one, but depends upon a partnership agreement among them. This usually reflects the amount of capital each partner has invested in the business. Partnerships can be formed very easily and the legal position of partners is not very different from that of sole traders. Unlike members of a company partners may find their personal property is at risk if they are sued by creditors. It is also possible to form an unlimited company. Since member's liability is unlimited this is, in effect, similar to a partnership.

If the advantage of forming a company is that is offers members some protection in case of bankruptcy, the disadvantage is that there are many regulations to observe in setting it up and running it. Under English law, there must be a minimum of two people and they must sign a document called a memorandum of association. The memorandum contains the name of the company, its objects, whether it is limited by shares or guarantee and the amount of share capital.

There are some restrictions on the choice of name: for example, the register will not accept a name that is the same or very similar to a company already registered, since this could confuse consumers and clients.

Date: 2015-12-12; view: 574; Нарушение авторских прав