Cambridge IGCSE Accounting(0452)/O Level Principles of Accounts(7110) Notes: Introduction to Limited Liability Companies
- Contrary to popular belief among students and common people the word company is not synonymous (the same as) the word business.
- Not all businesses are companies as we have already seen there are other types (forms) of businesses that are not companies for example sole traders, partnerships and franchise businesses.
- The word “company” is often used by people when referring to Limited Liability Companies.
- Limited Liability Companies are a group of companies found in the private sector whose liability is limited.
- This means that the owners of such companies only loose the amounts that they have invested in the business in the event of the business becoming insolvent.
- Hence the use of the word limited in the name of these companies.
- Limited companies are usually required to use the word limited as part of their name for example “Econet Wireless Limited.”
- Ownership of such business is in the form of shares.
- The capital of companies is divided into units called shares.
- Also companies are treated as separate entities under the law.
- This means that the company can enter into contracts and sue and be sued in its own name.
To access more topics go to the Cambridge IGCSE Accounting(0452)/O Level Principles of Accounts(7110) Notes.