University:
California State University, Northridge
Course:
BUS 104 | Introduction to Business
Academic year:

2023
Views:

140

Pages:

1
Author:

JJIssac

LIMITED LIABILITY COMPANIES Deciding on the appropriate structure for your business is an important early decision. Many entrepreneurs opt for becoming a limited company due to the benefits this legal framework provides. Incorporating offers owners limited liability while also creating an entity that can function long into the future regardless of any single owner's involvement. To become a limited company, you'll need to draft key foundational documents known as the Memorandum and Articles that outline your operation's goals and internal rules. These tie into the broader Companies Act that governs corporate registrations nationwide. Compliance with ongoing legal obligations like holding annual shareholder meetings becomes part of running your business properly as a company. Private limited companies have a minimum of two shareholders but cannot exceed fifty people, excluding any employees who may be granted shares. This owner group has the flexibility to remain small and selective about newcomers since shares cannot be advertised publicly but rather only offered to approved parties. Ownership is also not easily transferrable without getting consent from fellow shareholders first. Initial operational funds come from the sale of shares to founding investors, delineating a fixed value for each unit purchased. Additional capital sources include retaining profits internally, taking loans from banks and lending institutions, utilizing leasing structures, benefiting from trade credit terms or seeking investment from supportive government organizations. Together these options can fuel stable longterm growth. Directors oversee daily administration and are usually larger shareholders themselves with substantial commitment to the venture's success. Incorporation offers the major advantage of owners enjoying limited exposure for debts and liabilities. Personal residential property or other assets owned outside of the business cannot be appropriated in bankruptcy proceedings affecting the company. Of course, adopting a company format requires more intricacies and maintenance than a sole proprietorship. Proper tax and statutory compliance becomes a necessity. However, for viable corporations aiming to scale up over decades perhaps employing future generations, the long-view benefits readily outweigh initial complexities for risk-averse shareholders seeking to safeguard personal wealth. Incorporation remains very popular among both new and mature enterprises in Kenya and globally for good reason.