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SIMPLIFIER: LIMITED COMPANIES



  Jun 12, 2024

SIMPLIFIER: LIMITED COMPANIES



LIMITED COMPANIES: DEFINITION AND EXAMPLES

Q: What does "Limited" mean in PLCs and Ltd companies?

A: In Public Limited Companies (PLCs) and Private Limited Companies (Ltd), "Limited" means that shareholders' liability is restricted to their investment in the company. This safeguard ensures that personal assets are not at risk if the company incurs debts or faces bankruptcy.

Q: Can you provide an example from a retail business?

A: In a retail business, if you invest 3,750,000 INR and the business accumulates a debt of 7,500,000 INR and subsequently closes, your loss is limited to your initial investment of 3,750,000 INR. Your personal assets remain secure.

Q: How does this apply to a tech startup?

A: For a tech startup, if you co-found the company with an investment of 1,875,000 INR each, and the startup dissolves with a debt of 5,250,000 INR, your financial loss is capped at your initial investment of 1,875,000 INR. Your personal assets are protected.

Q: What happens in the case of group companies?

A: If you own shares in Company A, and Company A incurs debts or goes bankrupt, your financial loss is restricted to your investment in Company A alone. Your liability does not extend to other personal assets or investments in other companies.


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