A Limited Company (Leaving Cert Business): Revision Notes

A Limited Company

Running a Limited Company

A private limited company (Ltd or CLS) is a business structure in Ireland governed by the Companies Act 2014.

• Formation: A limited company must create a constitution, including the company name, statement of being limited by shares, and limited liability of members. It must be registered with the Companies Registration Office (CRO) to obtain a certificate of incorporation.
• Liability: Shareholders have limited liability, meaning they are not personally liable for business debts beyond their investment.
• Control: Controlled by shareholders based on the principle of 'one share, one vote'. Shareholders elect a board of directors to manage the company, including appointing key officers like the managing director or CEO.
• Finance: Capital can be raised by issuing shares to a maximum of 149 shareholders. Profits are distributed as dividends.

Advantages of setting up as a Limited Company

Being set up as a Limited Company comes with a number of benefits such as:

• Access to Capital: Can raise capital by issuing shares, which helps in funding business growth and development.
• Limited Liability: Shareholders are only liable for their initial investment, protecting personal assets from business liabilities.
• Continuity of Existence: The company can continue to operate independently of changes in ownership, including the death of shareholders.

Disadvantages of setting up as a Limited Company

Some drawbacks of setting up as a Limited Company include:

• More Expensive to Set Up: Higher costs for setting up, annual accounts, and compliance compared to sole traders and partnerships.
• Filing of Accounts: Required to file annual returns and accounts, increasing administrative burden and costs.

Designated Activity Companies

Another type of Limited Company is a Designated Activity Company (DAC). DACs are established by the Companies Act 2014. Some features of DACs include:

• Directors: Requires a minimum of two directors.
• Activity: Established for a specific purpose and limited to operating within that activity.
• AGM Requirement: Must hold an Annual General Meeting unless it has only one shareholder. All financial institutions are required to set up as DACs. An example of a DAC is Ryanair.