Limited companies

• Private Limited Companies

  • Owned by shareholders, who have one or more shares in the business.
  • Shareholders have limited liability.
  • Shares are sold privately to investors who are already known to the business.
  • Aim to maximise profits, grow and increase market share
  • Controlled by a Board of Directors who are managed by a managing director.
  • Have to produce documents called the Memosadum of Association and Articles of Association.
• Limited Liability

  • The owners personal positions are not at risk if the business gets into debts, as they only lose their investment in the company.
• Advantages of private limited company

  • Shareholders have limited liability.
  • Capital can be raised by selling shares.
  • They do not have to disclose most the information the public limited companies have to provide.
  • Ownership aren't lost to outsiders as all shareholders are known.
• Disadvantages of private limited company

  • Profits have to be split with shareholders by issuing dividends.
  • Legal process required to set up the company.
  • Shares cannot be sold quickly Publicly on the Stock Exchange, so there is limited source of capital available.
  • Financial accounts can't be kept private as they must be shared with the Companies House and are therefore made publicly available.
• Public Limited Company

  • Owned by shareholders who have limited liability.
  • Must have a minimum of £50,000 share capital (usually a large company).
  • Controlled by a Board of Directors.
  • Can sell their shares through the stock market.
  • They aim to dominate the market, increase market share and market value.
• Advantages of Public Limited Company

  • Shareholders have limited liability.
  • Large amounts of finance can be easily raised through the public sale of share.
  • Banks are very willing to lend PLC's money due to their size and reputation, as they are seen less risky.
  • Organisation has financial stability, enabling it to develop and expand.
• Disadvantages of Public Limited Company

  • Dividends are shared with many shareholders.
  • Control of the business can be lost if anyone can buy shares of the stock market.
  • Annual account have to be published.
  • Setting up a PLC can be costly and complicated.
  • Employees can feel alienated from those at top.
  • They can grow so large that they cannot be managed affectively.