GLOSSARY

Limited Company

A company that is registered, has a memorandum of association and shareholders. It trades as a separate legal entity and the liability of it's shareholders is limited (compared to a sole trader or partnership).

Limited Liability

A private company may be limited by shares or by guarantee ( a commitment to contribute a given sum if the company is wound up). All public companies formed since 1980 are limited by shares.

Limited liability for a company's members means that if the company is unable to pay its debts and is put into liquidation, the members will not be required to contribute more than they have actually paid or agreed to pay towards settling its debts.

There is no statutory minimum or maximum capital for a private company (LTD). There must be at least one director and one secretary (not the same person).

As a legally separate person, a company can:

* own property

* employ people

* act as director or secretary of another company

* enter into contracts

* sue in the courts

* be sued

Liquidation

The process of turning all of a company's assets into cash, usually done in order to pay off liabilities.

Liquidity Ratio

Current Assets, less Stock, divided by Current Liabilities. Because stock, which can be hard to liquidate or overstated in the accounts, is removed from the equation this is a more testing index than Current Ratio.

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