Private Limited Companies and Public Limited Companies

Similarities between private limited companies (ltd) and public limited companies (plc).

i) Both have limited liability for shareholders and so are not liable for debt if ownership changes.

ii) There is a legal procedure in setting up the business which is costly.

Financial information filed with the registrar can be inspected by the public or competitors.

iii) There may be prospects of improved terms of trade when a limited

Company is registered for VAT.

The differences between private limited companies (ltd) amd public limited companies.

i) In a private limited company, shares can only be transferred privately because they are not advertised to the public for general sale. All shareholders must agree on the transfer.

ii) In a private limited company, if one shareholder sells his shares it may take a while to find a buyer.

iii) A public limited company must have a minimum of £50,000 share capital and cannot begin trading until it has received a 25% payment for these shares.

The advantages of public limited companies (plc)

i) All have limited liability which means that they are not liable for all debts if the ownership changes.

ii) Their transparency and obligation to publish their accounts ensures that they honour their targets.

iii) Large funds can be raised from the public issue of shares

iv) It is easier to raise finance as they are perceived as having more collateral.

v) They may eventually dominate the market because of their size.

Disadvantages of public limited companies (plc)

i) There may be high set up costs.

ii) They are controlled by various Company acts which aim to protect shareholders.

iii) There may be a separation between ownership and control which may lead to the interests of the owners being ignored.

iv) As share issues are available for public ownership, an outside interest may procure ownership of the firm.

v) Because of their size, there is less customer service provided.

vi) They may be...