Type of finance in limited liability company?
One of the most important feature of a limited company is Limited Liability. The company and its owners are separate entities i.e during a financial predicament like insolvency the creditors and lenders of the business will be paid out by selling company assetslike building, machinery etc. and not from the personal assets of the owners. Therefore they have limited liability.
The main sources of finance to limited company is:SHARE ISSUE: this is one of the most common and obvoius source of finance for a limited company. This can categorized into the following types:Ordinary share: simply it confers right of ownership and each holder of this type of share has right to one vote. The share is tradeable in a stock exchange. Share holders are paid a dinidend if only a profit is made.these are risk equity.Preference share: unlike the former type this does not confer right to ownership and thus no votings too. This group of shareholders are paid a fixed percentage of the profit as dividend and are not paid otherwise.
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