Bacoconsultants
A company is a type of business structure that is a separate legal entity from its owners. It’s a complex business structure, with higher set-up and administrative costs because of extra reporting requirements and higher-level legal obligations.
MERITS:
- Shareholders have limited liability.
- Separate legal personality.
- Continuity in the event of the death of a shareholder.
- Original owner is still often able to retain control.
- Able to raise capital from sale of shares to family, friends and employees.
- Greater status than an unincorporated business.
- Limited liability .
- Separate legal identity .
- Continuity .
- Ease of buying and selling of shares for shareholders – this encourages investment in plc’s .
- Access to substantial capital sources due to the ability to issue a prospectus to the public and to offer shares for sale.
DE MERITS:
- Legal formalities involved in establishing the business .
- Capital cannot be raised by sale of shares to the general public .
- Quite difficult for shareholders to sell shares.
- End of year accounts must be sent to Companies House available for public inspection there ( less secrecy over financial affairs than sole trader or partnership )
- Legal formalities in formation.
- Cost of business consultants and financial advisers when creating such a company.
- Share prices subject to fluctuation – sometimes for reasons beyond business control, for example state of the economy.
- Legal requirements concerning disclosure of information to shareholders and the public, for example annual publication of detailed report and accounts.
- Risk of takeover due to the availability of the shares on the Stock Exchange.
- Directors influenced by short – term objectives of major investors.