Well that's not quite true Curtis.
I could spend hours writing out a very length explaination to it all, as I've actually been in the position of being closed due to bankrupcy (which ended up not happening thanks to talking it through with the IRS)
Essentically it breaks down to this:
Solo Trader: Full Responsibilty for all Debts. The only restriction if closure happens due to bankrupcy is that the owner may not own (in any form) another company until that debt is settled.
Limited Liability: All owners (minimum of 2 required) responsible up to the amount of money they invest, up to 50,000 units. As this is the maximum number of shares they may have.
Base amount for each share is $/£/€ 1.00, no one is responsible above this amount and debts are wiped clean past that.
You do however get a ban usually 2-6years from ownership of another company (all owners do) if it has to declare bankrupcy that is greater than what it can pay off using the shares.
Most companies are instated with the basic 2 individuals, with 100 Shares; purchase of additional shares is done through the governmental entity that incorporates companies (here in the UK is Company House). Further more, until your profits hit 50,000 then any debt from bankrupcy is automatically wiped clean.
Basically speaking you must be successful enough to be eligable to pay taxes before you're accountable for debt. As such it is very rare for any Limited Company to actually cause any financial trouble if it goes under, unless another law was broken such as Tax Evasion.
Coporation: Shares are resold to cover the debt after closure, if this covers with money to spare then shareholders will recieve their share of what is left. Ownership Shareholders however are fully responsible for any additional debt left over.
There are no restrictions on ownership of new or additional businesses. Also any debts of the parent company are also shared amongst the child companies. Basically if one goes down they all will unless debts can be recovered, it is quite a normal practise for a parent corporation in trouble to close or sell a child corporation in order to cover debts to remain trading.
Both Limited and Corporate models are very good for different situations, and really have some very good laws to prevent anyone from being seriously affected post-bankrupcy.
Yes, you will loose the money you put in.. but you won't be any worse off really. This is why they're such great business models.
If you wish to maintain control, then a Limited company is best as the Owners decide who receives shares.
Share ownership in Limited companies does not equate to ownership, that is merely the possible investment that can be put in to basically secure against potencial debts.
Share ownership in a Corporation however is a very different matter, as whoever owns the most shares has the largest voting potencial.
You voting potencial on what happens within the company is directly propotional to the number of shares you own, so while every share holder has a say... those who have the most shares have the biggest say.
This is a big deal as every corporate decision must be presented to the board and voted on. So the direction of the company really falls on the shoulders of the share holders.
Reason this is true though is because you can invest as much money as you can afford to. While for the company this equates to their spending power from the start and reserve funds during normal operation; the shareholders will expect a return else could pull out. Generally that means you must make sure profit return needs to atleast equal what the combined total of the share worth is.
The more profit you turn above the share value, that is then shared amongst the holders and raises the value of the shares.
In a similar fashion, if you turn below then it will decrease share value.
Hopefully most of you understand that.
A while back, I had actually thought of an interesting project.
It was a simple game of sorts, and the concept really could evolve to be something more real-world profitable. But the idea was this.
You had a program that allowed you to create using drag'n'drop interface for logic and simple resource building very basic games... like say Asteroids, or Space Invaders, etc.
Each player had a set amount of credits, which they could use to start up a company, invest and purchase these games/programs created. So in order to earn more, to either do bigger and better developments, you'd have to invest more.
Can't remember why I never really got past the concept stage, but always thought it would be an interesting experiment game. Especially as the participation unlike most games similar isn't you just invest and purchase for set amounts of return from ai controlled markets; but that the market was shaped by the very players themselves for the products available, and the potencial sales.
Might be an awesome tool to teach business really.
