Public company advantages and disadvantages

While most companies limited by shares are set up as private companies, in this article we look at the advantages and disadvantages of a public limited company. What is public limited company? As well as those forming new companies, a proper evaluation of the advantages and disadvantages of a public limited company will be needed for an existing private limited company considering converting to a plc. Disadvantages of a Public Limited Company.

Potential for Loss of Control: Ultimately, shares control company ownership.

Shares count for votes in PLCs, which means if you sell off more than of your company , there is the potential for shareholders to take over and even eject you from the business. As said earlier, the financial benefit in the form of raising capital is the most distinct advantage. Capital can be used to fund research and.

A public company is required to observe several legal formalities. There is excessive Government control over public companies. Flexibility of operations is re­duced. Paid officials do not have the incentive to work hard and increase efficiency of.

Advantages of a Public Limited Company.

Having Shares will fund expansion, allowing the business to grow. This also raises company profile. The business can raise a lot of capital because there is no limit for shareholders to invest. Shares are transferable, so investors can split profits. You can get input from investors.

Secondly, it means that those who invest in the firm are protected from extreme loss if the company fails. Therefore, a public company can avail of the economies of large scale operations. Shares of a public company are traded on stock exchanges. Any shareholder can find out the value.

I have written an article in the past titled “ The pros and cons of doing business as a public corporation ” and this article will just be a re-validation of my previous points. While going public provides significant advantages to a company and its stockholders, the requirements imposed under securities laws can mean significant disadvantages to the company and its operations. These include increased costs, securities law compliance, changes in corporate governance structure and becoming a “slave to the stock price. Enjoy economies of scale.

The advantages and disadvantages of public corporation are important to know when wanting to convert your private business to a public corporation. Private limited company advantages and disadvantages ). The private limited firm can easily be initiated and documented with the collaboration of two members. Public limited company is the large scale business that consists of directors and shareholders.

PLC enjoys huge benefits like limited liability, transferability, borrowing capacity, and others. The Company Secretary must be a qualified person (in a private company the secretary does not need to be qualified) The minimum number of Directors is two (just one needed for a private company ) The main advantages of a being public limited company are: Better access to capital – i. Limited Liability: The liability of shareholders, unless and otherwise state is limited to the face value of shares held by them or guarantee given by them. To understand the advantages and disadvantages of a limited liability company , let’s take the example of three individuals: Sam, Paul, and Harry.

They want to start a business together but they are quite uncomfortable with forming a partnership since in that case, they will be personally liable for the debts of the business.