Goals of a Private Limited

Company (LTD)
to generate a profit
increase eectiveness of marketing

develop new product lines

lower production costs

to satisfy the customers and the shareholders

Characteristics of a Private
Limited Company:
cannot raise share capital from the general public

shares not sold to the public; not on stock

market

shares sold to private individuals, i.e family

members, friends

improve customer service (increase customer

satisfaction)

shares cannot be traded without prior agreement

from the Board Of Directors (BOD > controls
the business)

demonstrate commitment to community

run by a managing director

supply aordable products for customers

have limited liability

generate profit for shareholders

governed by 2 legal documents

to become a more ecient business (increase

productivity)

Memorandum of Association

Articles of Association

increase eciency of manufacturing

become more sustainable

to expand/develop the business

increase market share (target new
demographics)

regarded as operating within the private sector

around 20-40 owners
at least 1 shareholder

at least 1 director

at least 1 secretary
an Annual General Meeting must be held

there is a legal dierence between the company

and the owners; even if the owners change, the
company will not; possesses continuity

Private Limited
Companies (LTD)
A private limited company is a type of corporation
(company); a business that is owned by its
shareholders.

Process of Starting Up a Private

Limited Company

Examples of Private Limited

Companies
In Hong Kong:

Chow Tai Fook Enterprises Ltd.

King Wan Corporation Ltd.

NWS (New World Services) Holdings Ltd.

The Dairy Farm Company Ltd.

Around the World:

Chanel

IKEA

Rolex

Virgin Atlantic

Travelex

When is a Private Limited

Company the Most Suitable
type of Ownership?

when running a family business

the BOD (Board of Directors) is the family;

keep control, make all decisions

method as to how goals will be achieved

if you have goals of becoming large;

multi-national
companies are more likely to go global than
sole traders are

have limited liability

Specialisation of
workforce can occur;
making for a more
productive company

sell shares

obtain loans

obtaining business registration

gain legal identity

be granted a Certificate of Incorporation

opening of a business bank account

able to make use of

more sources of
finance; can raise large
amounts of capital

obtaining start-up capital

tax benefits; corporate

tax is paid on profits, (as
oppose to income tax)

can benefit from

economies of scale,
e.g cheaper for a
company to borrow
money (than it is for sole
traders)

as a company expands,
communication
problems can arise

more expensive to run

(comparative to a
partnership)

information (e.g
financial data) must be
disclosed; lack of
privacy

formation of the
company is
complicated and
expensive

loss of control - due to

separation of
ownership (owners
have little say)

marketing/promoting/advertising of the
business and its products
internet; website, social media,
commercials

when in possession of valuable and

numerous personal assets
having a limited liability will ensure you dont
loose anything

writing a business plan

outline business goals

Disadvantages

Advantages

print advertising; billboards, flyers

Potential Problems in Starting Up a Private Limited Company

lack of finance; no money to purchase fixed assets

problems with marketing; fail to meet needs of customers, unestablished customer base

cash flow problems; high production costs

human resource management issues; inexperienced workforce, unmotivated workforce, communication

problems

legal issues; no business registration, lack of insurance measures, no copyright regulations