COMPANIES
A company is a legal body separate and apart from the owners (shareholders). It ensures
limited liability, which means that the owner’s private wealth will not be compromised in
case of business failure. Companies are suitable for high-capital businesses since companies
can attract significant capital by offering shares to the public. There are two types of
companies:
1.Private Limited Companies: One or more owners who can sell its’ shares to only the people
known by the existing shareholders (family and friends).
2.Public Limited Companies: Two or more owners who can sell its’ shares to any
individual/organization in the general public through stock exchanges.
Advantages:
Limited Liability; this is because, the company and the shareholders have separate
legal identities.
Huge amounts of capital: selling shares to other people (especially in Public Ltd.
Co’s), raises a huge amount of capital, which is why companies are large.
Public Ltd. Companies can advertise their shares, in the form of a prospectus, which
tells interested individuals about the business, it’s activities, profits, board of
directors, shares on sale, share prices etc. This helps to attract investors.
Disadvantages:
Required to disclose financial information: Sometimes, private limited companies are
required by law to publish their financial statements annually, while for public limited
companies, it is legally compulsory to publish all accounts and reports. This is a cost
incurred by the company, also other competing companies could use the information
to learn the company secrets.
Private Limited Companies cannot sell shares to the public. Their shares can only be
sold to people they know with the agreement of other shareholders. This raises lesser
capital than Public Ltd. Companies.
Public Ltd. Companies require a lot of legal documents and investigations before it
can be listed on the stock exchange.
Public and Private Limited Companies must also hold an Annual General Meeting
(AGM), where all shareholders are informed about the performance of the company
and company decisions, vote on strategic decisions and elect board of directors. This
is very expensive to set up, especially if there are thousands of shareholders.
Public Ltd. Companies may have managerial problems: since they are very large.
Communication problems may occur which will slow down decision-making.
In Public Ltd. Companies, there may be a divorce of ownership and control: The
shareholders can lose control of the company when other large shareholders outvote
them or when board of directors control company decisions.
COOPERATIVES
This is a form of business that is owned collectively by its members. It usually works to their
mutual benefit, being a democratic organization in which every member is free to air his/her
opinion, no matter how much he/she has invested. Cooperatives are formed to cut costs and
benefit from the best opportunities within an industry, such as agriculture, retail, or credit
unions. This form of organization values the community’s well-being rather than profit.
Successful cooperatives enhance the members’ confidence, cooperation, and responsibility.
Types of Cooperatives
Consumer Cooperatives: Owned by the people who purchase goods and services,
allowing them to save money collectively.
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A company is a legal body separate and apart from the owners (shareholders). It ensures
limited liability, which means that the owner’s private wealth will not be compromised in
case of business failure. Companies are suitable for high-capital businesses since companies
can attract significant capital by offering shares to the public. There are two types of
companies:
1.Private Limited Companies: One or more owners who can sell its’ shares to only the people
known by the existing shareholders (family and friends).
2.Public Limited Companies: Two or more owners who can sell its’ shares to any
individual/organization in the general public through stock exchanges.
Advantages:
Limited Liability; this is because, the company and the shareholders have separate
legal identities.
Huge amounts of capital: selling shares to other people (especially in Public Ltd.
Co’s), raises a huge amount of capital, which is why companies are large.
Public Ltd. Companies can advertise their shares, in the form of a prospectus, which
tells interested individuals about the business, it’s activities, profits, board of
directors, shares on sale, share prices etc. This helps to attract investors.
Disadvantages:
Required to disclose financial information: Sometimes, private limited companies are
required by law to publish their financial statements annually, while for public limited
companies, it is legally compulsory to publish all accounts and reports. This is a cost
incurred by the company, also other competing companies could use the information
to learn the company secrets.
Private Limited Companies cannot sell shares to the public. Their shares can only be
sold to people they know with the agreement of other shareholders. This raises lesser
capital than Public Ltd. Companies.
Public Ltd. Companies require a lot of legal documents and investigations before it
can be listed on the stock exchange.
Public and Private Limited Companies must also hold an Annual General Meeting
(AGM), where all shareholders are informed about the performance of the company
and company decisions, vote on strategic decisions and elect board of directors. This
is very expensive to set up, especially if there are thousands of shareholders.
Public Ltd. Companies may have managerial problems: since they are very large.
Communication problems may occur which will slow down decision-making.
In Public Ltd. Companies, there may be a divorce of ownership and control: The
shareholders can lose control of the company when other large shareholders outvote
them or when board of directors control company decisions.
COOPERATIVES
This is a form of business that is owned collectively by its members. It usually works to their
mutual benefit, being a democratic organization in which every member is free to air his/her
opinion, no matter how much he/she has invested. Cooperatives are formed to cut costs and
benefit from the best opportunities within an industry, such as agriculture, retail, or credit
unions. This form of organization values the community’s well-being rather than profit.
Successful cooperatives enhance the members’ confidence, cooperation, and responsibility.
Types of Cooperatives
Consumer Cooperatives: Owned by the people who purchase goods and services,
allowing them to save money collectively.
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