Disadvantages Of Private Companies Essay

INTRODUCTION
During the course of this essay, I will be analyzing and evaluating private limited company (Ltd.) and franchises, two common and profitable forms of business ownership. Private limited companies are companies that are small, privately held business entities. They limit owner liability and the maximum number of shareholders is 50. Holders are restricted from publically trading shares. They are a separate legal entity in the eyes of the law. Ltd.’s have an article and memorandum of association that classify and outline the business, and they must be registered at the company’s house. Franchises are simple ways of expanding a business and distributing products through a licensed relationship. A franchise is when an entrepreneur with no idea of their own approaches a successful business and appeals for their franchise. This allows the entrepreneur (franchisee) to trade for the franchise. The franchisees are responsible for payments such as

Growth may be limited as there are only 50 shareholders.
Continuity of Existence. Shares cannot be sold without agreement of other shareholders.
Minimum no. of shareholders is only 2. Many restrictive and complex rules that govern accounts of Ltd.’s.
Maximum no. of shareholders is 50, meaning more capital can be raised. Dilution of power can lead to arguments and problems between shareholders and directors
Area for expansion is higher as it is easier to raise capital and limited liability can be exploited. Franchises (For the franchisee):
Advantages Disadvantages
Less financial and experimental risk. Can be expensive to start up.
National Marketing Help. Profits must be shared with the franchisor..
Back up support from franchisor. Strict contracts and legal terms must be signed.
Predictable set up costs. Lack of independence.
Included start up help from franchisor which helps kick-starting business preparations. Strict operating