A public limited company (plc) is a company whose securities are traded publicly on the stock exchange. These types of companies are tightly regulated and must publicly disclose the truth about its financial position so that investors can determine the worth of their stock.
Advantages to a Public Limited Company
There are a few sizeable advantages to having a public limited company.
- Limited Liability for shareholders.
The business is viewed as a separate legal entity. This means that even if a shareholder(s) leaves the PLC or dies, the business can continue.
Ability to raise large amount of capital. Public limited companies are able to raise large sums of money because there is no limit to how many shareholders a PLC can have.
The shares of the PLCs are freely transferable. This provides liquidity for shareholders.
Disadvantages to a Public Limited Company
Although there are profitable advantages to forming a public limited company there are some distinct disadvantages.
- There are many legal formalities to starting a public limited company:
- There must be at least 7 shareholders before the PLC can be formed.
- There must be at least 3 directors.
In order to protect public investors, there are many controls and regulations that the business must follow.
There is a possibility that the original owners can lose control of the public limited company in the issue of a dispute or violation.
Some public limited companies can grow very large. As a result, many can suffer from mismanagement and slow decision making.