What is a public limited company?

In this article we will give you an in depth look into PLCs to provide you an insight as to how they operate. Read on for more information on PLCs.

What is a public limited company?

A public limited company, or 'PLC' for short, is a company that is permitted by law to sell its shares to the general public. If you run a PLC you are not required to offer public shares if you prefer not to, however the option is available if and when necessary.

A public limited company is a business organization governed by directors and owned by shareholders. A public limited company may offer public shares. Moreover, there are additional requirements that a PLC must satisfy as a result of being public, including additional tax administration and making financial reports public so that prospective shareholders have all the information they need before investing.

A public limited company is also listed on the stock market and is therefore required to be more public and open about its operations than a private company.

What are the advantages and disadvantages of a PLC?

Advantages of public limited company

1. What distinguishes it as a legal entity distinct from its shareholders is that shareholder liability for the company's losses is limited to the value of their share investment.

2. A PLC may be sued independently of you, its shareholders. This is because the company does not belong to any one individual.

3. To set up a public limited company you must have a minimum of seven shareholders or members and a number of an unlimited number of shareholders as your share capital allows.

4. You can raise capital for the business through the selling of shares. You can do this through a stock exchange market which is where public limited company shares are purchased and sold. They are readily transferable between members and stock exchange traders. This capital can be used to finance expansion and new possibilities. Additionally, capital can be utilized to repay debt.

5. A stock market listing can help boost a company's reputation and respect. Publicity helps build brand recognition. Furthermore, public records can aid in the recruitment of business partners.

6. Transparency may help enhance a brand's impression among customers.

7. A public limited company is unaffected by the death of one of its shareholders simply because a dead member’s shares are transferred to the firm's next of kin, and the business proceeds as usual.

Disadvantages of public limited company

1. Typically, forming a Public Limited Company is a complicated process as compared to a Limited Company which requires one director, a PLC requires two directors.

2. The term "public" should be regarded literally here. Once a business goes public, it becomes subject to public review. The business's financial books and records are exposed to the public, allowing competitors to ascertain the precise amount of profit or loss the firm is experiencing.

3. PLCs face increased regulation, both in terms of taxation and Companies House furthermore for public companies, HMRC tax deadlines are shortened.

4. Unlike company secretaries in limited liability companies, the company secretary of a PLC must be properly certified.

5. Shareholders in PLCs can be anybody and as a result this dilutes a company's united goal.

6. The greater the number of shareholders, the more power is distributed, leaving public limited companies more exposed.

7. Public limited companies are required to have an annual general meeting.

How to set up a public limited company?

According to UK company legislation, to set up a Public Limited Company you must have a share capital of at least £50,000 and in registering a PLC, it must have the PLC designation following the company name.

You may set up any company as a public limited company (PLC) if the following requirements are satisfied:

• You must have at least two shareholders, and share capital of up to £50,000 or more if it is available, with at least 25% of that capital being 'paid up'.
   
• You must ensure the company is registered with Companies House; at least two directors have been appointed, one of whom is an individual rather than a company; and a certified company secretary has been appointed.

Conclusion

Businesses are not obligated to eventually go public. Numerous firms remain private throughout their existence. The majority of firms that convert to a public limited company are well established, have a strong management structure, and are thus well-positioned to mitigate the risks associated with going public.