Meaning of a Limited Liability Company

Limited Liability Companies is usually formed by people who contribute to a common purse for the purpose of making running a business enterprise with the aim of making a profit.

The contribution made by each person is called shares; a person who contributes his shares is then referred to as shareholder. A shareholders shares profit in proportion to the number of shares held.

Limited Liabilities mean that a shareholder can only lose only the amount of money he has invested in the company if the business fails or fold up.

Types of Limited Liabilities Companies

There are two types of Limited Liability Companies which are:

  1. The Private limited liability company: It is a joint stock company formed by at least two people (shareholders)

Sources of capital

  • Retained profit
  • Contributions of members which is regarded as shares
  • sales of new shares
  • Loans and overdraft from banks

Advantages of Private Limited Liability Company

  • The shareholders enjoy limited liability privileges
  • The profit and loss of the business is shared
  • Private limited companies do not need to publish their accounts
  • They can raise more capital than partnership or sole proprietorship
  • The death or withdrawal of a member cannot bring the business to a close…

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