amount that he or she： paid or agreed to pay into the partnership as a capital
contribution； received from the partnership a。。er it became insolvent。
To keep this limited liability； a limited partner may not participate in the
management of the business； with very few exceptions。 A limited partner
who does get actively involved in the management of the business risks
losing immunity from personal liability and having the same legal exposure
as a general partner。
The advantage of a limited partnership as a business structure is that
it provides a way for business owners to raise money （from the limited
partners） without either having to take in new partners who will be active
in the business or having to form a limited pany。 A general partnership
that’s been operating for years can also create a limited partnership to
finance expansion。
Limited pany
Of the 4。5 million businesses trading in the UK； over 1。4 million are limited
panies。 As the name suggests； in this form of business your liability is
limited to the amount you state that you will contribute by way of share
capital； though you may not actually have to put that money in。
A limited pany has a legal identity of its own； separate from the
people who own or run it。 This means that； in the event of failure； creditors’
claims are restricted to the assets of the pany。 The shareholders of the
business are not liable as individuals for the business debts beyond the
paid…up value of their shares。 This applies even if the shareholders are working
directors； unless of course the pany has been trading fraudulently。
Other advantages include the freedom to raise capital by selling shares。
Disadvantages include the cost involved in se。。ing up the pany and
the legal requirement in some cases for the pany’s accounts to be audited
by a chartered or certified accountant。 Usually it is only businesses
with assets approaching ￡3m that have to be audited but if； for example；
you have shareholders who own more than 10 per cent of your firm they
can ask for the accounts to be audited。 The behaviour of panies and
their directors is governed by panies Acts that have e into effect
since 1844； the latest of which came into effect in November 2006。
Public limited pany （PLC）
PLCs are panies that can sell shares to the public at large； either through
a recognized stock market or by advertising in the press or through intermediaries。
They need to fulfil some minimum； not too onerous conditions：
Business Law 179
。 It must state that it is a PLC in its articles of association。
。 It must have an authorized share capital of at least ￡50；000。
。 Before it can trade； ￡50；000 of share capital must be taken up and a
quarter of that must be actually paid up。
。 Each allo。。ed share must be paid up to at least a quarter of its nominal
value。
。 There must be at least two shareholders； two directors and a pany
secretary who meets certain standards in terms of qualifications or
experience。
See also Chapter 2 for more on public capital。
City code on takeovers and mergers
Buying up a PLC is a more plicated process than taking over a private
pany or business。 In the first instance； shareholders in the business
being acquired have to be offered the same deal。 Family； directors and
those with major blocks of shares can’t be offered preferential treatment。
The buying pany must be able to fulfil the cash consideration involved
before making any announcement。 There are conditions under which a
potential bidder must either make a formal offer or walk away from the
target for at least six months。 Once 90 per cent of a target pany’s shares
have been acquired； the remaining shareholders have to accept the deal。
The Take Over Panel （thetakeoverpanel。uk） rules on taking
over another pany quoted on a stock market run to 266 pages！
pany limited by guarantee
This type of incorporation is used for non…profit organizations that require
corporate status as a means of protecting participants。 There are no shareholders
but its members give an undertaking to contribute a nominal
amount towards the winding up of the pany in the event of a shortfall
when it closes down。 It cannot distribute its profits to its members； and is
therefore eligible to apply for charitable status if necessary。 You may find
this type of pany being used by a business as a means of isolating part
of its activities； such as clubs or sports associations that are not part of its
profit…generating business。
Co…operative
A co…operative is an enterprise owned and controlled by the people working
in it。 Once in danger of being extinct； the workers’ co…operative is
enjoying something of a eback； and there are over 4；370 operating in
the UK； employing 195；000 people。 They are growing at the rate of 20 per
cent per annum。
180 The Thirty…Day MBA
Help and advice on business corporate
structure
A Guidance Note entitled ‘Business Ownership’ is available from panies
House （wwwpanieshouse。gov。uk 》 Guidance Booklets）。
Business Link （businesslink。gov。uk 》 Taxes； returns and payroll 》
Choosing and se。。ing up a legal structure 》 Legal structure： the basics） has
a guide to pu。。ing your business on a proper legal footing； explaining the
tax and other implications of different ownership structures。
Cooperatives UK （cooperatives…ukop 》 Services 》 Co…operative
Development） is the central membership organization for co…operative
enterprises throughout the UK。 This link is to the regional network。
Desktop Lawyer （desktoplawyer。uk 》 BUSINESS 》 BUSINESS
START…UP 》 Choosing a business structure 》 The Partnership） has a
summary of the pros and cons of partnerships as well as inexpensive partnership
deeds。
EMPLOYMENT LAW
Trading regulations
Organizations are heavily regulated in almost every sphere of their trading
operations。 Some types of business require a permit before they can even
start trading and all businesses have to ply with certain standards when
it es to advertising； holding information or offering credit。 These are the
regulations that govern the trading activities of most business ventures。
Getting a licence or permit
Some businesses； such as those working with food or alcohol； employment
agencies； mini…cabs and hairdressers； need a licence or permit before they
can set up in business at all。 Even playing music in public； recorded or live；
or pu。。ing table and chairs on a pavement means ge。。ing permission from
someone。 Your local authority planning department can advise you on
what rules will apply to your business。 You can also use this Business Link
website （businesslink。gov。uk 》 Your type of business） from which
you can use their interactive tool to find out which permits； licences and
registrations will apply and where to get more information。
Advertising and descriptive standards
Any advertising or promotion you undertake concerning your business
and its products and services； including descriptions on packaging； leaflets
and instructions and those given verbally； have to ply with the relevant
Business Law 181
regulations。 You can’t just make any claims you believe to be appropriate
for your business。 Such claims must be decent； honest； truthful and take
into account your wider responsibilities to consumers and anyone else
likely to be affected； if you say anything that is misleading or fails to meet
any of these tests then you could leave yourself open to being sued。
The five bodies concerned with se。。ing the standards and enforcing the
rules are：
。 The Advertising Authority （asa。uk 》 Advertising Codes） for
printed ma。。er； newspapers； magazines and so forth and the internet。
。 Of （wwwof。uk 》 About Of 》 pliance； Accessibility
and Diversity） is responsible for ensuring advertisements on television
and radio ply with rules on what can and cannot be advertised；
including any special conditions such as the timing and content of
material aimed at children。
。 The Financial Services Authority （fsa。gov。uk 》 Being regulated
》 Financial Promotions） has the responsibility to see that financial
promotions are clear； fair and not misleading。
。 The Office of Fair Trading （o。。。gov。uk 》 Advice and resources 》
Resource base 》 Approved codes of practice） is responsible for ensuring
that advertisements are not misleading or make unfair or exaggerated
parisons with other products and services and to help consumers
find businesses that have high standards of customer service。
。 Trading Standards （tradingstandards。gov。uk 》 For business 》
guidance leaflets 》 Trade Descriptions） covers anything such as quantity；
size； position； method of manufacture； strength； performance； place
of manufacture； date； brand name； conformity with any recognized
standard or history。
plaints； returns and refunds
Customers buying products are entitled to expect that the goods are ‘fit
for purpose’ in that they can do what they claim； and； if the customer has
informed you of a particular need； that they are suitable for that purpose。
The goods also have to be of ‘satisfactory quality’； that is； durable and
without defects that woul