Lesson 2 of 6 · All lessons in this module
  1. Sole proprietorships and partnerships
  2. Limited companies and comparing all the forms
  3. Key features of corporate issuers
  4. Corporate taxation and double taxation
  5. Publicly versus privately owned corporate issuers
  6. Going public, going private and who owns corporations

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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