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Limited companies are usually set up as they provide limited liability if the business should fail. A sole trader can be held liable for any debts in his business, possibly affecting his personal assets. However, a limited company can only lose the money invested in the company, without personal funds being seized. There are two types of limited company; public limited company and private limited company.

Shares of a public limited company can be bought by the general public, although the initial value of the shares must be dividendsat least £50,000. A private limited company may have a smaller share value and are not allowed to be sold to the general public. Shareholders are the owners of a limited company, and receive dividend payments every year, which is a share of any profit made. The amount of shares owned by a shareholder influences the ownership of the company.

The allocation of shares depends on whether the shareholders want to have equal ownership of the business. If a shareholder wants to own 100 percent of the issued shares, he would take the total amount; if 100 shares were available, he would take 100 shares. Two shareholders who want to own the shares equally between them would split the shares, 50 percent each. Any split is possible, depending on who has the greater share of the business. One shareholder may hold 80 of the shares, while the remaining 20 may be split between several other shareholders. Allocation of shares is a complex procedure which may require professional advice.

About The Author

Kara Copple

An experienced business and finance writer, sometimes moonlighting as a fiction writer and blogger.

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