Goals of a Private Limited Company (LTD)

• to generate a profit

• increase effectiveness of marketing

• develop new product lines

• lower production costs

• to satisfy the customers and the shareholders

• improve customer service (increase customer satisfaction)

• demonstrate commitment to community

• supply affordable products for customers

• generate profit for shareholders

• to become a more efficient business (increase productivity)

• increase efficiency of manufacturing

• become more sustainable

• to expand/develop the business

• increase market share (target new demographics)

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Characteristics of a Private Limited Company:

• cannot raise share capital from the general public

• shares not sold to the public; not on stock market

• shares sold to private individuals, i.e family members, friends

• shares cannot be traded without prior agreement from the Board Of Directors (BOD —> controls the business)

• run by a managing director

• have limited liability

• governed by 2 legal documents

• Memorandum of Association

• Articles of Association

• regarded as operating within the private sector

• around 20-40 owners

• at least 1 shareholder

• at least 1 director

• at least 1 secretary

• an Annual General Meeting must be held

• there is a legal difference between the company and the owners; even if the owners change, the company will not; possesses continuity

Private Limited Companies (LTD)

A private limited company is a type of corporation (company); a business that is owned by its

shareholders.

Examples of Private Limited Companies

In Hong Kong: • Chow Tai Fook Enterprises Ltd.• King Wan Corporation Ltd.• NWS (New World Services) Holdings Ltd.• The Dairy Farm Company Ltd.!Around the World: • Chanel• IKEA• Rolex• Virgin Atlantic• Travelex

Process of Starting Up a Private Limited Company

• writing a business plan

• outline business goals

• method as to how goals will be achieved

• obtaining start-up capital

• sell shares

• obtain loans

• obtaining business registration

• gain legal identity

• be granted a ‘Certificate of Incorporation’

• opening of a business bank account

• marketing/promoting/advertising of the business and its products

• internet; website, social media, commercials

• print advertising; billboards, flyers

Advantages

• able to make use of more sources of

finance; can raise large amounts of capital

• have limited liability

• Specialisation of workforce can occur;

making for a more productive company

• tax benefits; corporate tax is paid on profits, (as oppose to income tax)

• can benefit from economies of scale,

e.g cheaper for a company to borrow

money (than it is for sole traders)

Disadvantages

• as a company expands, communication

problems can arise

• more expensive to run (comparative to a

partnership)

• information (e.g financial data) must be

disclosed; lack of privacy

• formation of the company is

complicated and expensive

• loss of control - due to separation of

ownership (owners have little say)

Potential Problems in Starting Up a Private Limited Company !• lack of finance; no money to purchase fixed assets• problems with marketing; fail to meet needs of customers, unestablished customer base• cash flow problems; high production costs• human resource management issues; inexperienced workforce, unmotivated workforce, communication

problems• legal issues; no business registration, lack of insurance measures, no copyright regulations

When is a Private Limited Company the Most Suitable

type of Ownership? !• when running a family business • the BOD (Board of Directors) is the family;

keep control, make all decisions!• when in possession of valuable and

numerous personal assets • having a limited liability will ensure you don’t

loose anything !• if you have goals of becoming large;

multi-national • companies are more likely to go global than

sole traders are