Limited Companies.

Public Companies: These are companies that allow the

A company is a group of people joined together for the public to buy shares in the company and have a minimum
purpose of conducting a number of two with no maximum.
business for making profit. A company can be called as Characteristics / Features Public Company:
limited liability or joint stock. 1. The minimum number is two with no maximum.
Types of limited Liabilities: 2. Shares are freely transferable to any member of the
There are two types of limited liabilities i.e. liability by public.
Shares and liability by Guarantee. 3. Members of the public are free to buy shares from the
a) Liability by Shares: This is a company in which each stock exchange.
shareholder‟s liability is limited to 4. It is owned by individuals and the government cannot
the amount of money he/she contributed to the business as influence membership.
capital.Think Critically, Solve the Problem” 5. It must publish its annual accounts /books to enable the
b) Limited by Guarantee: This is a company in which the public know its financial stand.
liability of each shareholder is limited to the amount of 6. Members’ liability is limited to their capital contributions
money he/she pledged to pay in the event that the company Advantages of public Limited Companies:
runs bankrupt and is unable to pay its creditors (people  Large finance due to the large numbers of shareholders
demanding it). hence chances of expansion.
A limited liability is owned jointly by different people who are  There is continuity of the company‟s business even if the
called Share-holders. entire shareholders die.
Types of Companies:  It is a separate legal entity from the owners and therefore
(a) Statutory Companies: These are companies formed they can be sued and they can also sue for damages or loss.
under the Act of parliament  Limited liability as any liabilities or debts can not affect the
and owned by the government. Examples are the shareholders of companies.
government parastatal s and public corporations.  Transfer of shares from one person to another without the
(b) Registered Companies: These are companies formed consent of other members.
under the companies Act of 1962 and 1985 and are owned  Employment of Professionals due to large finance to
by the private sector. manage them profitably.
Types of Registered Companies:  They have public confidence since their activities are
These are classified according to the members of regulated by the government
shareholders i.e. public and private companies or according under the company Act.
to the liability of the members‟ i.e. limited and unlimited  People with small capital who cannot start business alone
companies. can subscribe capital to a company and become
shareholders hence earning dividends at the end of the Private Companies: These usually develop from partners
financial year. and have a minimum of two and maximum of fifty members.
“Think Critically, Solve the Problem” Features of Private Limited Companies:
 Shareholders of companies are safeguarded by the legal 1. It is a separate legal entity from the owners.
regulations underlying these companies and therefore their 2. Its capital is divided into various shares.
interests in the companies being safe. 3. Members‟ liability is limited to their capital contributions
 They can easily borrow money from financial institutions 4. They are formed with the aim of making profits.
since they are registered and large. 5. It is a voluntary organization.
 They can operate on large scale thereby enjoying Advantages of Private Limited Companies:
economies of scale in their production.  More capital can be raised due to the large number of
Disadvantages of Public Liability Companies: shareholders.
 They lack of secrecy since they publish their information of  The death, bankruptcy, insanity or withdraw of any
final accounts in the media. member cannot affect the operations and existence of the
 They are difficult and expensive to form as they require a company.
lot of documents to be prepared and presented to the  Employment of Professional: With their large finance,
Registrar of Companies. companies can manage the services of expert with the
 Shareholders of the company have little control as regards required skills to run companies profitably.
the normal running of the company as only few  They can easily borrow money from financial institutions
administrators‟ influence the daily running of these since they are registered and large.
companies. “Think Critically, Solve the Problem”
 There is excessive government influence and control in  Market research and marketing can easily be carried out to
companies‟ form of rules and regulations which reduces the promote the company sales.
efficiency of these companies. Disadvantages of private limited companies:
 They are characterized by corruption and embezzlement of  Shares cannot free freely be transferred as it is the case
funds by the administrators. with public companies.
 There is slow decision-making process characterized by  Capital contributed in form of share is limited to 50
red tape and a lot of bureaucracy. shareholders.
 They cannot change from one line of business to another  Formation of private limited companies requires a lot of
like the case in sole trade. time, money and
 Some directors may have no personal interest in the documentations.
business which may slow the company progress.  There is high tax imposed on these companies which
reduces on the amount of
profits earned by these companies 8. It enables the business to enjoy security from the state.
 Decision making in these companies take long time as this 9. It enables the business to get loans/funding from the
is done by the directors. government e.g. youth funds.
FORMALISING A BUSINESS: 10. It is a basic requirement for any business registration.
Business formalization refers to the process by which an objectives and aims.
entrepreneur goes through to
make his/her business legal and accepted to operate.
Process of Formalizing Business:
1) Searching for a business name of your choice.
2) Reserving the name with the Uganda Registration Service
Bureau.
3) Obtaining a certificate of incorporation from Uganda
Registration Service Bureau.
4) Obtaining an investment License from URA.
5) Obtaining a taxpayer Identification Number from URA.
6) Obtaining a Trading license from the local council
authority.
7) Registering with National Social Security Fund.
Benefits of a Formalized Business.
1. It makes business gains legal status in the country it
operates.
2. It enables the registration for license for investment,
trading and taxation licenses.
3. It makes business to enjoy public goods like roads.
4. It enables the business to safeguard its name by acquiring
a trade name/brand
5. It creates more employment opportunities for the
business through business expansion.
6. It leads to better marketing and advertising opportunities
for increased client.
7. It leads to improve competitiveness in the regional
market.