According to the law on limited companies, they are divided into public and private companies. Only the stock of the public companies can be submitted to public trading. The minimum capital investment of a public company depends on your countries law. Family companies and other small businesses are considered private companies.
The entire capital stock must be paid for prior to registration to the company's bank account.
A limited company can be set up by one or several persons. The promoters may be either natural or juridical persons. In other words, the number of promoters is not restricted. To set up a limited company, those involved have to compile a charter of foundation which contains the nominal value of the shares and detailed personal data of the promoters. The charter of foundation has to contain a suggestion for the Articles of Association. In the case of small limited companies, a ready-made basic the Articles of Association is commonly used, comprising the documents required by law, the business name, domicile, capital stock, nominal value of the shares, means of sending the invitation to the annual meeting, and the fiscal period.
Prior to the registration of the company, apport property must be in the possession and control of the company. Work effort cannot be consider apport to the company, rather it must be something that has some economical value to the company.
A constitutive meeting is held to make a decision on setting up a limited company. In small companies it is common to hold the board meeting in connection with the constitutive meeting.
Note that a limited company becomes a juridical unit first after it has been entered into the trade register. The shareholders are responsible for the operation of the company until registration, and any assignments (such as contracts) should indicate that they have been made in the name of the limited company to be set up. After registration, the limited company, becomes a juridical subject, i.e. it has legal capacity and is responsible for its contracts and assignments. The capital stock has to be entirely paid for by the time when the limited company is registered.
A constitutive meeting is held to make a decision on choosing the members of the executive board as well as accountants. In addition, the statutes are also agreed upon. After setting up a company, you must make a register of members which lists all shares or share certificates in numerical order, the date of issue, and the name and address of the shareholder. A shareholders register must also be maintained.
The company´s routine business is run by an executive manager. In addition to the executive manager, an executive board is responsible for running the company. Decisions concerning the company are also made in the annual general meeting in which shareholders may use their rights. The annual general meeting must be held within six months from the termination of the fiscal period. The items discussed are, for example, approval of the final accounts, resolution on conceding freedom from liability, and resolution on acts upon profits or losses made by the company.
The shareholders are not responsible for the operation of the company with their personal property rather to the amount of invested venture capital only. However, it is quite common that when a company is set up, a loan must be taken e.g. to pay for the capital stock and investments, which means that the company's loans have to be guaranteed in person.
A limited company may have shares with different rights which means that either the votes brought by a share is different or the rights brought by it when sharing property of the company is different. In small companies, however, all shares usually bring the same rights to their owners.
The partners can withdraw property from the company as wages or through the allotment of profit. In most cases, a partner is an employee of his own company which means, for example, that mileage compensation and travel expenses are paid to him/her just like to any employee of the company. In other words, employer's standard wage expenses are being paid for.
The distribution of dividends is decided by the annual meeting.
Giving up one's partnership is easy, since the stocks are typically freely deliverable. The change of partners has no impact whatsoever on the operation of the company, which among other things makes free stock trading possible.
There are various ways to increase the capital stock, such as subscription issue, rights to options, convertible loan stocks, stock dividends, and subordinated loans.
The partners can make mutual partner agreements. In a partner agreement an agreement is made on the change of ownership, development of operation, board members, etc. It is also common to make an agreement about the disputes between the partners.
In a limited company, mostly a double-entry bookkeeping is required. Accountants are chosen in the annual general meeting , and their task is to examine the final accounts, bookkeeping as well as administration of the company.
A company must have at least one accountant. The accountant cannot be the executive manager or any board member, any person keeping the books or an employee of the company.
According to the company law all companies must announce their trade register number, the company's name, address and domicile in their letters and forms. This requirement concerns all such correspondence which may involve legal consequences.
Any person joining the administrative bodies of a company is required to give their acceptance and personal identity code in writing. This concerns also the executive manager, the accountant and their substitutes. The accountant´s personal details, the fiscal year and closing of accounts are also subject to registration.
Overview Forms of Company |
Single-member company |
Unlimited partnership |
Limited partnership |