Public and Private Limited Companies

PLC’s and Ltd’s

Limited Companies

Sole traders and partnerships often wish to expand

Sometimes they are held back by a lack of capital

Also, partnerships can only take on a specific number of people….

Sole traders and partnerships have unlimited liability…

THEREFORE

THE SOLUTION IS:

To form a limited liability company (Ltd.) Sell shares to investors

The 2 types of limited company are:

Private limited company Public limited company

Private Limited Company

Uses Ltd after its name Shares are sold mainly to friends and

family of the owners Shares not offered to the public The majority of the shareholders make

the decisions Minimum number of shareholders is 2 Minimum amount of share capital is £2

to start up

An example of a Ltd…

Public Limited Company

Uses PLC after their name Shares are open for sale to the public Shares are traded on the stock

exchange PLC must have at least £50,000 of share

capital to start up Managers control how the company is

run

Example of PLC

Advantages of Limited Companies

Limited Liability Encourage investment from shareholders

Finance can be raised quickly from selling shares

Usually bigger than partnerships and sole traders, better reputation for borrowing money

Continuity

Disadvantages of Limited Companies

Main director is overruled by shareholders Share prices might go down

Investors might stop giving you money Information is open to the general public

Costly (£100,000 to produce an annual report and accounts)

Lots of paperwork to be drawn up… Shareholders have majority

votes….owners could be voted out!