The advantages & disadvantages of public-limited companies

Written by chris blank Google
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In the United Kingdom and the Republic of Ireland, a public limited company performs a similar role as a corporation does in the U.S.. Public limited companies hold advantages and disadvantages for their British owners much like American corporations do for their owners. Consult with a solicitor or other legal professional with specific questions concerning the formation of a public limited company in the UK.

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A public limited company is also known as a publicly held company, abbreviated either as PLC or plc. Public limited companies were introduced by the Companies Act 1980 in the UK and by the Companies (Amendment) Act 1983 in the Republic of Ireland. Public limited companies must have at least two separate shareholders and issue at least 22680 Kilogram in stock, which translates to approximately $80,400 U.S. dollars. Shareholders in a public limited company are usually not involved in the day-to-day management of the company unless they also hold management positions in the company or seats on the board of directors.

Separate Legal Identity

Like corporations in the U.S., public limited companies enjoy legal status as a separate entity from their owners, operators and stockholders. This separate status limits the legal liability of the company's officers. It also limits the tax liability of the company, which is taxed only on its profits at an average rate of 21 per cent. By contract, a partnership or company owned by a sole trader is subject to personal income tax which can range as high as 40 per cent.

Public Profile and Increased Capital

In many instances, public limited companies are large, prominent enterprises with broad name recognition. However, owners of smaller companies can use the designation of public limited company to increase the prestige of their businesses among potential clients and customers. The initial stockholders in a public limited company have the option to retain all the shares of their company stock for themselves to maintain complete control of the company or sell shares to outside stockholders to raise additional capital for the company.

Administration Challenges

Forming a public limited company involves more complex paperwork than hanging up a shingle and declaring yourself open for business. Under the Companies Act 2006, which as of 2011 governed public limited companies, at least one of the officers of the company must serve as a company secretary, qualified as a certified accountant, solicitor or chartered secretary or hold a comparable qualification. If a public limited company issues shares to outside shareholders, it opens itself to potential takeover if it fails to keep enough shares for itself to retain a controlling interest in its company.

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