ECONS 101

LIMITED LIABILITY COMPANIES

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A Company can be defined as a Legal Person or Entity created by the Association of a Number of People in accordance with the Law for the Purpose of Pooling their Capital together in order to set up a Business Venture. Examples of Limited Liability Companies are: Julius Berger Nigeria Plc, Dunlop Nigeria Plc etc. A Company is an artificial person and is more than a mere association of individuals. It is a legal person with a personality of its own.

Types of Companies:

1. UNLIMITED LIABILITY COMPANY- The Liability of a member is limitless and he may be liable to the full amount of the company's debts in the event of liquidation. The Members will contribute more money, including their capital, to settle the debt of the company.

2. LIMITED LIABILITY COMPANY- The Liability or Burden of Debt in the company is limited to the amount of share capital the shareholders had agreed to contribute individually in the event of liquidation. A Shareholder cannot suffer the liability of the company up to his/her

private property. This means that if the Company folds up for debt and lack of fund, their own personal possessions would not be taken.

Types of Companies Under Limited Liability Companies:

1. COMPANIES LIMITED BY GUARANTEE- are not formed with the aim of engaging in trading activities or making profits. They are often formed by societies and other charitable contributions from members of the public to promote and develop certain interests or professions. The Liability of its members is limited by the Memorandum of Association to such an amount as the members may have undertaken to contribute to the assets in the event of its being wound up. Guarantee Companies are usually formed for the Furtherance of Art, Science, Education, Religion, Charity etc.

2. COMPANIES LIMITED BY SHARES- are the companies in which the liability of the shareholders is limited to the full value of the shares they have acquired. In Case of Liquidation, the shareholders will only be liable to the full extent of their shares contributed as Capital. They normally engage in Business Activities to make profit.

Types of Limited Liability Companies:

1. PRIVATE LIMITED LIABILITY COMPANY- is defined as one which by its articles restricts the right to transfer its shares, limits the number of its shareholders from 2 to 50, prohibits any invitation to the public to subscribe to its shares and the name of the private company must end with "Limited". For Example- Nasco Nigeria Ltd.

2. PUBLIC LIMITED LIABILITY COMPANY- is defined as one which by its article allows the public to subscribe to its shares, must have a minimum of seven persons but no maximum number is prescribed. It allows the shares to be transferred and the name of the public company must end with "Plc". For Example- Zenith Bank Plc, Dunlop Nigeria Plc etc. This is the type that is known as JOINT STOCK COMPANY.

Similarities Between Private and Public Limited Liability Companies:

1. Limited Liability- Both Companies have limited liability, meaning that in the event of liquidation, the shareholders can only lose the value attached to the shares they contributed.

2. Continuity of Existence- The chances of continuity and existence of both companies are high as the death or withdrawal of a shareholder, cannot affect the existence of the company.

3. Ploughing Back of Profit- Part of the profit can be ploughed back into the business for both companies, while remaining can be shared to the shareholders according to the amount of shares contributed.

4. Large Capital Outlay- Both Companies are capable of pooling large capital together to set up a business.

5. Legal Entity/Status- Both Companies are legal entities, which means they can sue and be sued in their own names due to the fact that both are registered companies. The Business Name is different from the owner's name.

6. Management- Both Companies appoint Directors for the proper and efficient Management of the Business.

Differences Between Private and Public Limited Liability Companies:

Private Limited Company	Public Limited Company
1. Shares are not easily Transferable, except with the consent of the Members.	Shares are easily Transferable.
2. Its shares are not quoted in the Stock Exchange Market.	Its shares are quoted on the Stock Exchange Market.
3. It does not issue Debentures ( Certificate of Indebtedness).	It issues debentures.
4. They don't need a Certificate of Trading to commence Business.	They need Certificate of Trading before they can commence Business.
5. They have a minimum of 2 shareholders and a maximum of 50 owners.	They have a minimum of 7 shareholders and a no maximum number of owners.
6. They are not allowed to use "Plc" but "Ltd" or "Unltd".	They are allowed to use "Plc".

NOTE: PARTS OF THIS POST WERE CULLED FROM TONAD ESSENTIAL ECONOMICS FOR SENIOR SECONDARY SCHOOLS BY C.E ANDE.  WE AT EDU-MADE-EASY RESPECT THIS CRAFT TOO MUCH TO DENY ITS ORIGIN. THANK YOU

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