Partnership

Partners jointly own a business and each partner is personally liable for the firm's debt. If any of the partners have limited liability (in a limited partnership) in a worse-case scenario they can lose only the capital they invested in the business (limited partnership was established by the Limited Partnership Act of 1907; the use of this form of partnership has not been extensive due to the ease of incorporating a private company). However, they cannot actively run the business and are therefore called "silent" partners. There are limitations to the number of partners: minimum of two and maximum of twenty (there is no maximum for accountants and solicitors). The partners are free to choose any name for the firm; however, "limited" must not be the

last word of the name. Like a sole trader, a partnership is not obliged to publish its accounts or have them audited. It shares requirements similar to those a sole proprietor does in terms of VAT and PAYE. A partnership may be created without any legal formalities based solely on the Partnership Act of 1890. However, to prevent possible future discord among partners, it is usual practice to draw up an agreement that clarifies the following issues:

• profit-sharing arrangements;

• capital contributions;

• voting rights;

• admission or expulsion of a partner;

• withdrawal from a partnership.

The next forms of business are commonly named companies. All issues regarding formation, registration and operation of companies are regulated by the Companies Act of 1985, amended as of 1989 (hereafter — the Companies Act).

Limited company

A limited company is the most common form of business. A limited company is a legal entity that is separate from shareholders and directors. The shareholders are not liable for the company's debts beyond the amount remaining unpaid on the shares they hold or guaranteed to a third party. To register a firm as a limited company (to incorporate a company) certain documents must be submitted to the Registrar of Companies who then issues a Certificate of Incorporation. This certificate permits the company to start its operations. A limited company is managed by the Board of Directors elected at annual shareholders' meetings.

As a rule, the accounts of a limited company have to be audited by registered auditors. A limited company must submit a set of audited accounts to the Registrar of Companies each year. This set should include the directors' report, the auditors' report, profit and loss accounts, the balance sheet, the statement of cash flow and explanatory notes to the figures in the accounts. In addition, it is required to file an annual return giving details on the directors and shareholders as well as some other statutory information. All information on file at the Companies' Registry is open to public inspection.

Limited companies are classified as private limited by shares, private limited by guarantee and public limited. In a private company limited by shares, members' liability is limited to the amount unpaid on shares they hold. If a company is limited by guarantee, its members' liability is limited to the amount they have agreed to contribute to the company's assets in case of its winding up. A public limited company's (PLC) shares may be offered for sale to the general public and members' liability is limited to the amount unpaid on shares held by them. The shares of a PLC can be transferred without the shareholders' permission. A private limited company (Ltd.) is prohibited by the Companies Act from advertising its shares for sale. Its shares may only be transferred with the agreement of all shareholders. A PLC is also required to issue shares in the amount of J50.000 minimum and to have at least two people as the company owners A private company may have even one owner.

Here are some examples of well-known companies that are registered in the UK as Ltd. or PLC.

Private limited companies:

Du Pont, Henkel, Rhone Poulenc Chemicals, Shell, Kraft Foods, McDonalds, Nestle, Procter & Gamble.

Public limited companies:

British Airways, Marks & Spencer, Smithkline Beecham, Unilever.

There is no apparent preference as to which form (Ltd. or PLC) applies more to this or that sector of the British economy. As to the national origin of the companies, large multinationals originating from abroad tend to be registered as private limited in the UK, whereas large British companies are predominantly private limited.