What is this episode about?
Learn about company law from sole trader to partnerships and limited liability companies both private and public in this new Business English episode from English Plus Podcast.
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I am using an automatic transcript service as it is not possible for me to do it on my own and I cannot afford human transcription at the moment. The service claims to have about 95% accuracy, which means there will still be some mistakes, so my apologies for having a less than perfect transcript, but I hope I can afford human transcription soon and I will solve this problem. However, the service is pretty good, and the transcript is almost perfect.
Welcome to a new episode from English plus podcast today’s episode, we will talk about company law. We will talk about partnerships, limited liability founding companies. We will talk about private and public companies and more in this business, English episode from English plus podcast. So without further ado, let’s start right away talking about company law.
[00:00:27] We will have Ben with us today and he will tell us about the differences between the different types of companies. The things we need to know. If we want to talk about business English. One thing before we start business English is not just about the words. Business. English is about the ideas. You need to know about it.
[00:00:46] Doesn’t have to be that you need to be a business major to understand these things, but it is very important to understand the concepts, not only the words or phrases, I’m not saying that we do not focus on words and phrases in English plus podcasts, but we focus on ideas as well. Especially in this episode, you will know what we mean because it’s not just about, yeah, we have.
[00:01:08] Partnerships, we have limited liability. That means this. And that means that we need to understand the concept behind those different types of companies. So without further ado, let me start. So Ben, the first question obviously is what are the main types of companies that you’re going to tell us about today?
[00:01:26] Well, there are a lot of types of companies, but the main types that we’re going to focus on because most companies are either partnerships, limited liability, and the limited liability companies can be private or public. So we will talk about these. We will talk about partnerships, limited liability companies, both private and public very well.
[00:01:47] So let’s start talking about partnerships then. Sure now partnerships might be very common, but it’s not as common as you might think, because there is a type of risk with these companies. And I will talk about this. Now, a partnership is a business arrangement in which several people work together or share the risks and profits in Britain and the U S partnerships do not have limited liability for debts.
[00:02:11] So the partners are fully liable or responsible for any debts. The business has. And that is why I said that this type of business is a little risky. Uh, Ben, what do you mean by they don’t have limited liability? Well, in a nutshell, when you don’t have a limited liability, that means if the company’s in trouble, you are in trouble and they may go after your private or your personal money, because you don’t have limited liability.
[00:02:39] We will talk more about limited liability in a minute, but that is the problem when it comes to partnerships. And that’s not everything. Partnerships are not legal entities. So in case of a legal action, it is the individual partners and not the partnership that is taken to court. So they can take you personally to court if you have a partnership, but in the case of a limited liability, they take the company to court, not a specific person.
[00:03:05] So that is also part of the limited liability, which. Partnerships are not. However, because I said at the beginning that there are a lot of types of companies. I have to say that in most European countries, there are various kinds of partnerships, which are legal entities, but still there is no limited liability when it comes to debts.
[00:03:25] So we’re not going to dig in a lot deeper in that, you know, I guess our listeners are more interested in the main difference between partnerships and limited liabilities. So I will stick to that. I have a question here. When you talk about partnerships, does it always have to be two people or more? Does it have a certain number or a specific number of partners?
[00:03:45] Not at all. It can be two people. It can be more, it doesn’t have a limit so to speak, but usually it’s not about a hundred people. Usually it’s about two, three, four, five people. But because if it is more than that, usually it is a limited liability company, but also we’re talking about partnerships. We can also have a sole trader business that is similar to partnerships that it doesn’t have limited liability.
[00:04:09] And sole trader business is an enterprise owned and operated by a single person. And as I said, it also has unlimited liability for debts. So if anything wrong happened in the company, the sole trader, they come after your personal money. So it’s a lot wiser when you want, when you decide to start a company to think about a limited liability company.
[00:04:32] All right. So I guess we have a pretty good idea. What a partnership is, a sole trader and the limited liability thing. I guess that’s what you’re going to talk, right? That’s right. Limited liability companies. That is the most common. And to be honest, it’s the safer choice. When you want to start a company.
[00:04:50] Now, a company is a business that is a legal entity. In other words, it has a separate legal existence from its owners to shareholders. It can enter into contracts and it can be sued or taken to court. If it breaks the contract, a company can, in theory, of course continue forever. Even if all the staff and owners change and that’s different from partnerships and sole traders, sole traders and partnerships are related directly to the partners, to the individual partners.
[00:05:20] But for a limited liability company, it’s different. People can change. Managers can change. Owners can change and the company stays. So that is a very important concept. Now, most companies have limited liability. That’s what we want to focus on, which means that the owners are not fully liable for or responsible for the business’s debts.
[00:05:41] These companies are known as limited companies. Their liability is limited to the value of their share capital. Now, the share capital is the amount of cash that the shareholders have contributed to the company. That’s what we call the share capital. Now, this limitation of liability encourages investors to risk their money, to become part owners of companies while leaving the management of these companies to qualified managers and senior managers, which are known as directors.
[00:06:07] These managers and full-time executive directors run the company for its owners. There are standard procedures of corporate governance, and that is the way a company is run by the management for the shareholders and how the managers are accountable to the shareholders. That’s what we call corporate governance, or these include separating the job of chairman from the managing director and having several, none execute of directors on the board of directors who do not work full-time for the company, but can offer it expert advice.
[00:06:40] Non-executive directors are often more objective that is they’re less influenced by their opinions and beliefs. That’s what we call objective. There can also be an audit comedy that contains several non-executive directors to which the auditor’s report. Alright. A lot of information about limited liability.
[00:06:59] So in a nutshell, are you saying that limited liability companies. Means that the owners are not fully responsible for the business’s debts. The companies are their own legal entity. So if you want to Sue the company, you can Sue the company, not a person who is an owner in the company or a shareholder.
[00:07:17] That’s right. And you also said that the company has a share Capitol. So that is the amount of cash that the shareholders have contributed to the company. And usually the people who run the company are different from the, yes, it is usually like that. Doesn’t have to be of course. Some owners of the company can also be the managers or the directors, but it doesn’t have to be, you can invest in companies like that and you don’t have to manage the company, especially if you are not qualified enough to run the business, you hire experienced managers, executed managers, and there is also don’t forget the non executed directors that can sit on the board.
[00:07:58] That’s right now. One more thing you said chairman, and there’s also the word president. What is the difference between these two? Because we hear sometimes the chairman of the company and the president of the company. The difference is very simple. We use chairman in British English and we use president in American English.
[00:08:15] And there’s also another word I mentioned that is usually used in British English. That is the managing director. Usually we use managing director in British English. When we say chief executing officer or CEO in American English, which might be the more famous word. I mean, people know what a CEO is.
[00:08:32] They might not know that managing director is just the same job. But that is just British English. Of course. All right. So we talked about partnerships. We talked about limited liability. What else? What’s next? Well, next, let’s talk a little bit about founders companies and here just focus on the word found.
[00:08:51] It’s not the past to find, right? Because find is a different verb. Find as if you lose something and then you find it. And the best to find is found, but found actually is the present form. And that is like to start the company. So we say people found companies or start companies. So what are we going to talk about concerning founding companies?
[00:09:11] Well, we’re going to talk about how it usually starts the articles of association or the bylaws. I will explain these things. What do you usually need to do when you want to found a company? Alright. So when people found or start companies, they draw up or prepare articles of association and a memorandum of association.
[00:09:32] And by the way, articles of association, that is a British English word in American English. They call it bylaws. And the memorandum of association is also a British English word in American English. They call it certificate of incorporation. So it’s the same thing, but of course, British English is different from American English.
[00:09:49] So whichever you want to use, but make sure you use the right word in the right country. I mean, you don’t want to go to the United States and start talking about memorandum of association because they usually use certificate of incorporation there, not memorandum of association. And you want to use bylaws instead of articles of association, if you want to use American English.
[00:10:09] But apart from that, let’s talk about the articles of association or the bylaws. What is that? What does it state. What does this document state, which is a founding document. That’s what you do when you found a company, the articles of association or bylaws, state, the rights and duties of the shareholders and directors.
[00:10:27] They state the relationships among different classes of shareholders, and they stake the relationships between shareholders and the company and its directors. It’s very important to have these things clearly defined in the articles of association or again, the bylaws. But for the memorandum of association or the certificate of incorporation, this one States the company’s name, the location of the company’s registered office.
[00:10:52] And it’s of course important because you want to know where to send the official documents, for example. And you want to mention in this document, the company’s purpose, the objectives of the company and the authorized share capital. And that means the maximum share capital. It can have. And these two different kinds of documents are necessary to have when you want to found a company or start.
[00:11:16] All right. So we talked about the articles of association or the bylaws, and we talked about the memorandum of association or certificate of incorporation as we call it an American English. I guess we will talk next about private and public companies, right? That’s right, we’ll do that. But before we go on and talk about private and public companies, let me remind you that you can find the show notes, the exercises to practice the things you’re learning here on our website.
[00:11:42] There is a custom post for every single episode we create. And the link is right in the description of the episode. So go to the description of the episode, take the link and take your English with it to the next level, because remember it’s not enough to listen. Unless you’re just enjoying what you’re listening.
[00:11:56] And for that reason, we really appreciate that you picked our podcasts, but if you want to take your English to the next level, take the link to our website, English plus podcast.com and it will get you there. And there’s also another link that will take you to our Patreon page. If you want to help us grow, create more content, reach more people, become our patron on Patreon and help us be the best we can be.
[00:12:16] With that being said, let’s get back and talk about private and public companies. So Ben private and public companies, are we still talking about limited companies? Absolutely. We’re talking about limited companies, but some of these companies are private and some of them are limited. When you say private or limited, are we talking about owned by the government or owned by individuals?
[00:12:35] Not necessarily, no. When we say private limited company or public limited company, the concept is different. We’re not talking about what is owned by the government and what is owned by individuals. So let me start talking about private companies. Private companies usually have limited or that’s what you see LTD next to the name of the company.
[00:12:54] That means limited company. We usually have it, of course, at the end of their name, when we say private companies or private limited companies, that means they are not allowed to sell their stocks or shares on an open market. Now, most companies are private. For example, there are about 1 million private companies in Britain compared to around 2000 public limited companies, which are called for short PLCs.
[00:13:17] These companies have PLC at the end of their name, like the other companies, the private limited companies have LTD at the end of their names. Now the difference, obviously, as we said, the private companies, they are not allowed to sell their stocks or shares on an open market, but the story is different.
[00:13:35] With public limited companies, their shares are publicly traded on the stock market. And stock exchange is a market where anyone can buy stocks and shares. Now the U S equivalent of a PLC is a company or corporation registered with the securities and exchange commission. Now in England is called PLCs in America.
[00:13:54] The SPLC thing is a corporation registered with the securities and exchange commission. And that is called the S E C R sec. Registered companies also known as listed companies. When we say listed companies, that means public limited companies. These companies can sell their shares or their shares are publicly traded on the stock market.
[00:14:16] They have to make quarterly reports, quarterly reports. We’re talking about quarterly every year. So every three months now they report on the sales revenue or turnover, the money received by the company in that period from selling goods or services, they have to report the gross profit. That is the turnover less.
[00:14:35] The cost of sales and the net profit, that is the gross profit, less administrative expenses and tax. Now companies on the London stock exchange are known as quoted companies. They have to produce a half yearly interim report, which informs shareholders about the company’s progress. And these reports are not audited, but all companies he’s with shareholders and stockholders have to send them an annual report each financial year.
[00:15:01] Now this contains a review of the year’s activity and an examination and explanation of the company’s financial position and results. Of course, these are not all the financial statements. There, there are a lot of other financial statements and notes. They have to change. There’s the auditor’s report on the financial statement.
[00:15:17] Of course, they have to send all of these things, especially when you are a public company and these documents have to be public unlike private companies, which don’t have to share everything with the public. They have to share it with the shareholders or the stakeholders, but not with everybody, not in public.
[00:15:33] All right. So to recap, the main difference between private companies, private limited liability companies and public limited liability companies that the private limited liability or those we see an LTD at the end of their names cannot sell their shares in the stock market while public limited liability companies can do that.
[00:15:52] So it is from here. When we say that the company wants to go public, right. That’s right. When a private limited company wants to go public, that means it wants to start selling their shares on the stock market. And obviously there goes the expression to go public. There’s one more thing I want to mention before we finish this episode, and that is the AGS.
[00:16:13] Public companies have to hold an annual general meeting or what we call an AGM and most private ones do too, but public companies have to do it. Private companies do it just because it is a good thing to do. Of course, it’s a good thing to meet once a year and talk to the shareholders. But for public companies, they have to do it by law.
[00:16:35] At this meeting, the shareholders can question directors about the content of the annual report, the financial statements they can vote to accept or reject the dividend recommended by the directors and vote on replacements for retiring members of the board. For example. The meeting can also carry out any other business stated in the company’s memorandum of association or certificate of incorporation and articles of association or by laws.
[00:16:59] Now sometimes when there is a crisis, the directors or the shareholders can request to hold an extraordinary general meeting or EGM, not AGM, it’s an EGM extraordinary general meeting to discuss the situation. For example, if there are claims of misconduct by the directors where they have behaved illegally, there could be an EGM.
[00:17:22] Now the EGM in American English, they just call it special meeting, which is a lot easier to be honest. I mean, extraordinary general meeting, a little bit too fancy. It’s a special meeting. Right. But anyway, in American English, they call it special meeting and they call the AGM, which is. Usually used in British English, they call it annual meeting of stockholders.
[00:17:42] So the annual meeting of stockholders or the annual general meeting that is the meeting public companies have to hold once a year. But again, as I said, private companies do that. All right. So we talked about a lot of things and I hope our listeners can find these things useful. And I hope you can tell the difference now between sole traders or partnerships and limited companies, both.
[00:18:05] Public and private. And we have a couple of other things we talked about as well. The AGM, the memorandum of association, the articles of association or bylaws, these documents that are needed for founding companies. And as I said, business, English is not just about knowing the words. You have to know the ideas behind the words.
[00:18:26] Doesn’t have to be that you are an expert or you are a specialist. You don’t have to be, but you need to understand at least the difference between limited liability companies and partnerships or sole traders. Now, that being said, that will be everything that I wanted to share with you today. Thank you very much, Ben, for being with us and talking about these things and for our listeners.
[00:18:47] We want to thank you very much for sticking around and listening to another episode from English plus podcast. This is your host, Danny. Don’t forget to visit our website English plus podcast.com because you can take your English to the next level. If you go there, you can find the link in the description.
[00:19:02] If you’re wondering. That’ll be all for today. I will see you next time.