What is a Public Limited Company?
A Public Limited Company is a business that has decided to offer it’s shares on the public stock market. The Stock Market is where anyone can invest in a Public Limited Company. These are usually high value, large businesses that can have massive profits, and offer dividends to those who invest.
In order to become a Public Limited Company, PLC, you need;
- At least two directors.
- A Secretary
- And you must float at least $50,000 shares on the stock exchange, to become a PLC.
Unlike other businesses, a PLC is often owned by a board of directors, that dictate the decisions of a business. PLC’s must also pay Dividend, which is money that the investors receive from the business, determined by their share value. As PLC’s have external influences, they also fluctuate in value and therefore can loose money. Some businesses owners also find that they can loose control. Being a PLC can bring in more capital and make the business more known publically on the sock exchange.
For contrast, to become a Sole Trader. All you have to do is contact HMRC (Her Majesty’s Revenue and Customs) and every year fill in a self assessment. An LTD must send a Memorandum of Association and Articles of Association. For this reason it becomes a lot harder to do so and often people will employ a Secretary. To be a PLC can take lots of time and can sometimes not be possible for companies with a very bad image. Companies also may struggle if they are unreliable or have seasonal traits, such as a manufacturer of Christmas gifts.
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.
- Investors may try to grow the business, through things like discounted advertising, if they own part of another business.
Disadvantages of being a Public Limited Company
- There could be a possible loss of control, as people may find that shareholders own over 50% of the shares, entitling them to the ownership of the business. This is also known as a divorce of control.
- Shareholders may have other plans to maximise profits over social and ethical goals.
- Share prices could collapse.
- There are a lot of legal formalities.
- Fluctuations in share price could make a company worthless overnight.
- PLC’s are hard to maintain. As they are usually large, often everyone has their own ideas.
- Some companies may be overvalued.
- Some do not have $50,000 worth of shares to float.
A PLC is usually for large companies. Small businesses will not always expect to grow, Corner shops for example, will not grow beyond what is possible due to the local footfall. Therefore PLC’s are often global businesses.