A company – properly called a joint stock company – is where a group of individuals put their money together to make a ‘joint stock’ of capital. The people who put up the money are called shareholders. They all own a share of the company, and expect to receive a share of its profits. The shareholders are also called ‘members’ because they are part of the company, but the company is a legal entity quite separate from the members who own it. In law, a company is regarded as an individual in its own right. It can make a profit or a loss; it can be held responsible for the actions of its employees; it can be sued; and, if the worst comes to the worst, it can go bankrupt (though in the case of companies this is called ‘going into liquidation’).

The amount of the company each shareholder owns is directly proportional to the money he puts in. The shares of large companies are bought and sold on the stock exchange. Such companies are called public companies, and anybody can buy their shares through a stockbroker or bank. The shares of many smaller companies, however, are owned entirely by the people who work in them.

Limited Liability

Nowadays nearly every joint stock company in the world is formed on the principle of limited liability. Limited liability means that if a company fails and has to close down, the individual shareholders will not be held responsible for the company’s debts. Each shareholder only loses the money he spent on buying his shares. Unlike a sole trader or a partner, his personal possessions cannot be sold to pay the company’s debts; his liability is limited to the amount he invested (hence the term ‘limited liability’).

Because of the principle of limited liability, establishing your new business as a company may appear an attractive option. Potential lenders and creditors are very well aware of the principle and its implications as well, however. If you apply for a loan or credit terms, they will naturally want to ensure that their money is returned in the event of your company failing. Particularly if you are setting up a new business, therefore, they may require you to personally guarantee any debts, e.g. by allowing them to place a legal charge on your property In this case, if your company does subsequently fail, the creditor can still pursue you personally for any debts outstanding.

Company Directors

Although a company is regarded in law as a separate person, it cannot carry out any business by itself. People must be appointed to manage and run the business, and these people are called the company directors. The minimum number of directors in a private company is one (though in this case someone else must fulfil the role of company secretary). A public limited company must have at least two directors.

In a small company, such as a family business, the shareholders are often themselves the company directors; they both own the company and run it. With larger companies it is usual for shareholders to appoint directors with the necessary skills to manage the company on their behalf. The shareholders meet just once a year, at an annual general meeting, to express their approval or disapproval of the way the directors are managing the business; to appoint new directors if required; and to accept or reject the directors’ recommendations on how the profits are to be distributed.

Again, in a small company all or most of the directors will be closely involved in the running of the business. In a larger company many of the directors may only work part-time for the company, simply attending board meetings at which general policy decisions are taken. They leave the day-to-day running of the company to one director, known as the managing director, or a small number of executive directors. Unless they are also shareholders, directors are not entitled to a share of the profits. However, they are entitled to a fee for the work they do for the company, plus their expenses. The managing director and executive directors, who work full-time for the company, also receive a salary, just like any other employee.

The directors may employ staff to work for them and managers to supervise those staff, but the directors have the overall responsibility and are answerable to the shareholders for the success or failure of the enterprise. The shareholders have the right to demand not only that the directors act in good faith, but also that they exercise skill and care in managing the business.

“Working 9 to 5, it’s a way to make a living”, Dolly Parton sang these words and are true – but is it the ONLY way to make a living. What would you do if you had passive income to support you – would you still be doing the job you are doing? Or would you be out with the family, travelling or buy that new house you dream of? Life is for living, so why not give it ago! What would you do if someone gave you 5 starting points to achieve this – would you consider aiming to live your life?

5 options to mull over and weigh up which will be your vehicle out of the rat race:

PROPERTY – Although the media tells us otherwise, now is actually a good time to buy property. Often the prices are cheaper and value will eventually rise (as it has after every other economic crisis). Make sure you do the research, talk to people who are also buying property now, and read up. A great book to read is “0 to 150 properties in 3.5 years” by Steve McKnight. These are many different ways to invest in property and this book covers a lot of them.

STOCKS – Now don’t shake your head at me and think I am completely mad. Before you jump to any conclusions read the article “Buy American, I am” by Warren Buffet. Here is a man who has survived stock crashes previously, and is one of the wealthiest men in the world, from stocks. My suggestion is do the research, if you are passionate about stocks – you will find a way to make money, especially at this time! Speak to others who are making money in stocks at this time – and learn from them.

START YOUR OWN BUSINESS OPPORTUNITY – Everything you see around you – the objects, the businesses and the relationships – began as a thought in someone’s mind. What gem is in your head that could bring you freedom and wealth? The best thing to do is start writing down your ideas, when something sticks -research it’s possibilities, the competition and so on. Ask people for their thoughts and ideas, it will evolve as you evolve. A brilliant book that will make sure you create a business that works for you, rather than you work in the business – “The E-Myth” by Michael Gerber.

FRANCHISES – If you feel that building your own business is too much of a risk, but still like the idea of having a business, Franchises are another great way to go! With proven systems that work and have proven profits, what more could you ask for. They often provide guidance and support through the whole way. One thing to keep in mind with franchises however is that you will need a substantial amount to invest with. Banks will probably lend you business loans for a franchise more so than an unproven business. Pick your franchise, check it aligns with your goals and also values & beliefs and you are on your way!

BUSINESS BASED FROM HOME OFFICE – A home based business is ideal for the stay at home parent looking to watch their children grow up. With the internet so useful and phone deals quite cheap, you can be at home – yet connected to customers around the globe! Home based businesses are often cheap to start up and can have the potential to make a lot of money. It is important to do your research as there are thousands out there, and some are illegal. Find the one that interests you and most importantly, has the potential to deliver the freedom and income you are looking for.

What now? As you read the above options, one may have stood out more to you than the others. Begin your “escaping the rat race” journey with that one. If it doesn’t work out, don’t be discouraged move to the next. You will learn more about what you do and don’t like as you go, enjoy the triumphs and learn from the mistakes. If you stay committed, it won’t be long before you are living the lifestyle of your dreams.