Public and Private Companies

A company is usually formed for the purpose of conducting business that is separate from its owners, the shareholders. The main difference is between public and private companies.

Private companies cannot sell shares to or raise money from the general public. A private company can be formed with a minimum of two people becoming its shareholders. They must appoint a director and a company secretary. If the company goes out of business, the responsibility of each shareholder is limited to the amount that they have contributed; they have limited liability. Such a company has Ltd (Limited) after its name. Private limited companies are often local family businesses and are common in the building, retailing and clothing industries.

Public companies can sell their shares to the general public (which they usually do through a stock exchange). A company continues to exist despite changes in (or deaths among) its owners. A company can hold assets; it can sue, and it can be sued. The profits are distributed to the members as dividends on their shareholding. Losses are borne by the company. The day-to-day management of the company is carried out by a board of directors.

Many large businesses in the UK are Public Limited Companies (PLC), which means that the public can buy and sell their shares on the stock exchange. Marks & Spencer, British Telecom and the National Westminster Bank are the examples of public limited companies.

In the US, businesses take the same basic forms. American companies have abbreviation Inc and Corp.

Other types of companies are:

1) Associated company, which is a company over which another company has substantial influence; for example it owns between 20 per cent and 50 per cent of its shares.

2) Holding company, a company that owns another company or other companies and which is sometimes referred to as the parent company (most public companies operate through a number of companies controlled by the group’s holding company).

3) Subsidiary company, a company controlled by a holding company, usually because the holding company owns (or indirectly owns through another subsidiary) more than 50 per cent of the subsidiary company’s share.

Corporation

As business became more competitive, new and more complex corporate combinations appear. Single ownerships and the partnerships have finance weaknesses and that is the reason why the corporation came into existence.

A corporation is a business organization authorized by the state to conduct business and is a separate legal entity from its owners. It is the dominant form of American business because it makes it possible to gather large amounts of capital together.

Before a corporation may do business, it must apply for and receive a charter from the state. The state must approve the articles of incorporation, which describe the basic purpose and structure of the proposed corporation.

The stockholders usually meet once a year to elect directors and to carry on other important business. Each share of stock entitles its owner to one vote. A stock holder who cannot attend the meeting can legally authorize another to vote his or her shares by proxy.

Management of a corporation consists of the board of directors who decide corporate policy, and the officers, who carry on the daily operations. The board is elected by the stockholders, and the officers are appointed by the board.

Vocabulary

1. distribution – распределение

2. for the benefit of – на благо (ради)

3. entrepreneur – владелец предприятия, предприниматель

4. direct – руководить

5. gain – получать

6. proprietorship – предпринимательство

7. sole proprietor – единоличный владелец

8. self-employed – обслуживающий собственное предприятие, работающий не по найму

9. be responsible for – отвечать за

10. be in charge of – возглавлять (отвечать за)

11. failure – провал