What is a Limited Liability Company (LLC)? What are the common characteristics of an LLC?

 LIMITED LIABILITY COMPANIES

If promoters wish to carry on business through the medium of limited liability companies they must choose which one of the various types of company they wish to form. The first choice is for the promoters to consider between limited and unlimited companies. If a company is limited it could be by shares or guarantee, if not limited it would be an unlimited company. Section 8 of the companies Act provides that for purposes of the Act, a company is an unlimited company if:

a) There is no limit on the liability of its members.

b) Its certificate of incorporation states that the liability of its members is unlimited.

c) Its certificate of incorporation states that it is a private company.

"Any seven or more persons or where the company to be formed will be a private company, any two or more persons associated for any lawful purpose may by subscribing their names to a memorandum of Association and otherwise complying with the requirements of this Act in respect of registration from an incorporated company with or without limited liability."

If the company is a profit making concern then it is wise to have a company limited by shared if not the company limited by guarantee is more suitable.

The promoters must also decide whether the company is to be private or public. Section 9 of the companies Act, defines a private company to mean a company which by its Articles

(i) Restricts the right to transfer its shares.

(ii) Limits the number of its members to filling not including persons who are the company and persons who having been formally in the employment of the company were while in that employment, and have continued after the determination of that employment to be members of the company.

(iii) Prohibits any invitation to the public to subscribe for any shares or debentures of the company.

(iv) Is not a company limited by gurantee.

Any company which does not fall in this definition is a public company. In order to form a public company, there must be at least seven persons to sign the memorandum of Association.