Business Law Questions Essay Example | Topics and Well Written Essays - 2000 words - 1

Business Law Questions - Essay Example This is different from Public companies where the shares are offered on a public stock exchange (Beatty & Samuelson, 2007). Another advantage would be that to form a Private Limited Company the minimum requirement is to have members with an upper limit of 50. In contrast, public Companies require a minimum of seven members with an unlimited upper limit. They are currently three partners and this is enough to form a Private Limited Company. Changing the business to a Private Limited Company enables the business to be able to source for funds from a wider scope than before. They can still obtain funds from family and friends, but now come into consideration from financial institutions. Companies are able to obtain better loans as they tend to have better credit scores when compared with other forms of business like partnerships. This is similar to Public Companies. The main difference is that Public Companies can raise more funds since their books of account are open to the public. Thi s increases the chances of getting debt financing. In forming a company they will enjoy the benefits of having limited liability, Salomon vs. A. Salomon & Co Ltd (1897). A limited company is limited to the extent of the shares held by each individual shareholder. In the case the company winds up, the only claim creditors can have is to the extent of unpaid up share capital. This is because in law, a company is a legal entity in its own right and is separate from the shareholders (Shtein & Lindgren, 1984). This also enables a continued existence even with the incapacitation of a shareholder (Adams, 2008). In the previous partnership, any event leading to the incapacitation of a single shareholder would have led to winding up of the business. In case they would like to expand further, the upper limit of 50 members enables the company to source for more funds by allowing interested members to subscribe.