Business Legal Status

Mars Bar

I'm not doing a business course but we have to do a business plan for setting up a record label for college and I'm doing the legal status section for it.

I was looking at a Private Limited Company or a partnership. What's the share capital for a Ltd. company? I get different answers from different sources but I don't really understand what share capital is any way. Would someone care to explain it to me please?

Mars Bar

Nobody?!

Peregrinus

Froma business plan point of view, formal "share capital" is unimportant.

Originally the idea was that those who founded a company would contribute to it enough money to form the working capital it needed for its enterprise. This would be the the "share capital", so called because it was shared between the founders, who became "shareholders". A share in a company, therefore, is the rights which come with having contributed (usually) 1 euro towards its total share capital.

Fairly early on, share capital became nominal. The founders of the company would contribute only (say) fifty or a hundred pounds, or as little as two pounds, to get the company off the ground and on the register of companies. Thereafter substantial working capital would largely be provided by loans from the founders (or from others).

I would have thought that, for a business plan, you need to have an idea of how much working capital you will need, and where you are going to get it, and what it will cost you (i.e. if you borrow your working capital, what will your interest cost be). But to the extent that the business is capitalised with your own money, you probably don't need to decide, for the purposes of the business plan, whether that is going to be in the form of share capital, or a director's loan to the company.

Mars Bar

Thanks Peregrinus! We were thinking of putting €2000 each into it so there would be €8000 for us to start up. (This is all imaginary by the way!). So from reading your post, €8000 would be our working capital. If we needed more money, we would be looking at a loan and would have to take into account the loan interest.

I was wondering if €8000 is enough to start up a Private Limited company or would be we have to make a partnership instead?

Peregrinus

You can start a private limited company with two euros, and in fact this is quite common. There is no minimum share capital requirement.

Mars Bar

Excellent, that means I don't have to go changing my presentation.

Thank you oh so very much!

Tom Young

Peregrinus wrote: »

You can start a private limited company with two euros, and in fact this is quite common. There is no minimum share capital requirement.

Does this not require some more explanation? .... That would be a table C company, etc. .....