A public limited company, also known as a PLC, is a company structure available to businesses in the UK. Unlike the other structures such as sole trader and partnerships, the business exists as a separate entity to the owners, offering protection from liabilities and debt.
Public limited company definition
A public limited company is a business that is managed by directors and owned by shareholders. A public limited company can offer shares to the public. There are also other obligations that a PLC must meet due to being public, including further admin regarding tax, and making their financial reports public so would-be shareholders have all the information they need before investing. A public limited company is also listed on the stock market and essentially needs to be more open and public about its details than a private company.
Is a limited company private or public?
A public limited company is public, that means that anyone can buy shares in the company. However, private limited companies (Ltd) exist and are, in fact, one of the most popular business structures in the UK. Most public limited companies will have started as private limited companies, and then turned public once they grew. This is because a private limited company needs to have share capital with a value of £50,000 to be eligible to go public, and so a period of business growth is needed by most companies to reach this threshold. The company will also need 75% of the shareholder votes in favour of going public, and the correct paperwork will need to be forwarded to Companies House.
Public limited company advantages and disadvantages
Businesses choose to become a public limited company because the pros of this new structure outweigh the cons. There are several big advantages to going public, but the change also requires significant changes to the management structure.
Advantages of public limited company
The company can raise capital through share sales
This raised capital can fund expansion and new opportunities
Capital can also be used to pay off debt
Publicity increases brand awareness
Listing on the stock market can increase company reputation and prestige
Public records can make it easier to attract business partners
Sense of transparency can improve customer perception of brand
Disadvantages of public limited company
Two directors are needed for a PLC, whereas a Ltd only needs one
More regulated both for taxes and Companies House
HMRC tax deadlines are shorter for public companies
Unlike Ltd’s company secretaries, a PLC’s company secretary must be fully qualified
Shareholders can be anyone who chooses to purchase, which can dilute a unified company vision
More vulnerable – the more shareholders there are, the more power has been distributed
A public limited company must hold an annual general meeting
When should businesses become a public limited company?
There is no obligation for businesses to eventually become public. Many businesses remain private for their whole lifespan. Most businesses that do become a public limited company are well established, with a solid management structure, and so are well-placed to buffer the potential risks that come with going public.
Can a public limited company become a private limited company?
Yes, a business can reverse its decision to go private by filling out the correct form and submitting it to Companies House. The decision to change back is usually because the benefits of being a public limited company no longer outweigh the disadvantages.
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