Lesson 2 of 6 · 14 min
Limited companies and comparing all the forms
Limited companies give every owner limited liability, split ownership into tradable shares and separate owners from managers; the public limited company (corporation) has no limits on owners, which makes it the best vehicle for raising capital, at the price of possible double taxation.
In short
- A private limited company (LLC, GmbH, SARL, G.K.…) gives limited liability to all owners, divides ownership into shares and has a board of directors elected by shareholders, but often limits the number of owners and share transfers and is usually pass-through for tax.
- A public limited company, or corporation (C-corporation, AG, société anonyme, K.K.…), has no legal limits on owners or transfers; it is the dominant form globally and the most suitable for going public.
- Its drawback is taxation: profit is taxed at the company and again at the shareholder when it is distributed. Retained profit escapes the second layer.
- The corporation has separate legal identity, is board and management operated, has limited liability and essentially unbounded access to capital.
- Forms can be layered: a corporation can be the GP of a limited partnership, giving management control and capital access while shielding the ultimate owners.
- Investment funds are usually organised either as corporations (investors hold shares) or as limited partnerships (investors are LPs; the manager is the GP).
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