Question

2. Discuss whether 4 individuals should form a public or private company and whether the company should be unlimited or limited. If you suggest that the company should be unlimited, should the company be limited by shares or by guarantee. Give reasons for the type of company chosen.

Answer 1

The company is an artificial person that has its common seal and has perpetual succession. There are two types of companies: limited and unlimited. In limited companies, the liability of members or stakeholders limits to the amount of money or shares that the member has invested. The limited companies have two types: private and public. On the other hand, countless companies have unlimited liability. The amount of invested capital does not play any role. The members are entirely liable, and their assets are also on a stake in case the company’s assets are unable to fulfill the liabilities. The four individuals should adopt the structure of a limited company. The limited company does not take the personal assets at stake as the members should embrace the concept of limited by shares. The members will only be liable to the number of shares of the members. There are many advantages of a limited company by shares. The first advantage is self-explanatory. It is that the limited company minimizes the personal liberty of the members. It improves the tax efficiency and planning. The taxes in a limited company are lesser than the tax rate in the other forms of business enterprises. It enhances the credibility or the trust of the customers in the company. The limited companies also provide excellent and notable remuneration to its members because of the tax-saving feature. Hence, the individuals should adopt the limited by shares company.