Joint Stock Companies: Private Limited Companies

A joint stock company sells shares to investors to raise money. These types of business organizations are known as limited companies.

The name of a limited company is always followed by the word 'limited' or letters 'ltd'. The limited comoanies are called so because liability of the owners are limited to the amount of shares they hold in that particular company.

A limited company is an artificial entity created by law. Which means the company can sue and be sued.

A private limited company is smaller than public limited companies. The main difference between them is that private limited companies can not sell shares at the stock exchage, while public limited companies do.

The documents required to register a company in Maldives can be obtained from the website Ministry of Economic Development.

Advantages of private limited companies

• Share holders have limited liability. While sole traders and partnerships are at disadvantage because of unlimited liability, private and public limited companies are at an advantage due to their liability being limited.
• Share holders have no management worries. The owners and the management of the company is usually different. Share holders can elect a board of Management at the Annual General Meeting. Each share has one voting power.
• One of the reasons why companies are preferred is because they are separate legal entities. The owners have no worries over the debts and if there is any problem, it is the company which is taken to the court, not the owners.
• Bank are more willing to give loans to private limited companies compared to partnerships and sole traders

Disadvantages of private limited companies

• The companies have to disclose their business information:The companies are required to submit annual reports to the Ministry of Economic Development and all the details of profits and losses need to be disclosed to all the stake holders as well. Therefore business secrecy is lost.
• AGM: The Annual General Meeting is held with shareholders for the purpose of electing board of directors. This sometimes is a big expense.
• Private limited companies have advantages over sole traders in terms of size and capital. However it is still not as good as a public limited company. Private limited companies cannot sell shares on the stock exchange.

Dhiraagu, Wataniya, and Villa Shipping are famous private limited companies in Maldives.

Soler Proprietorships, Partnerships, Private and Public Limited Companies are all in Private Sector of the Economy.

Where as Public Corporations are in Public Sector.

Next Topic: Public Limited Companies.

LEAVE YOUR COMMENT:
Name:
Email:
URL:
Comments:
	Note: Emails will not be visible or used in any way, and are not required. Please keep comments relevant. No HTML code is allowed.