Title: Advantages and disadvantages of public limited liability company PLC
“Discover the advantages and disadvantages of a Public Limited Liability Company (PLC), including access to capital, limited liability, regulatory compliance, and loss of control. Learn whether this business structure suits your goals.”
A Public Limited Liability Company (PLC) is a business structure that offers shareholders limited liability and allows shares to be publicly traded on a stock exchange. This corporate structure is popular for large-scale businesses seeking to raise capital and expand their operations. However, operating as a PLC has its own set of advantages and disadvantages, which are outlined below.
Contents
- Advantages of public limited liability company
- Disadvantages of public limited company.
See Also
Advantages of public limited company or (joint stock company).
- Legal entity: Public limited liability companies have legal existence. They have a distinctive personality from the owner, hence they can be sued in their own name.
- Perpetual existence: There is continuity in a joint stock company. The death or withdrawal of a shareholder cannot put an end to the business.
- Limited liability: Their liability is limited to the amount invested as capital in the business; private properties will not be affected.
- Large capital: They can raise enough capital by selling more shares or debentures to the public.
- Transferability of shares: Shares of a public limited liability company can easily be transferred without having an effect on the business operation.
- Loan facilities: Many banks prefer to Grant loans to the public limited companies than other forms of business units because there is no likelihood of default in payment.
- Economies of large-scale production: Public limited liability companies have sufficient capital for expansion, which can lead to mass production of goods.
- Democracy in management: In choosing the board of directors, shareholders have the right to vote or be voted for at the annual general meeting.
- Owners are separated from management: In joint stock companies, owners are separated from management. The shareholders are regarded as the owners of the company while the management is in the hands of board of directors.
- Employees can become co-owners: Employees could become co-owners of the business by purchasing shares in the company.
- Recruitment of experts: Joint stock company attracts men of experts.
- Research programs: In joint stock company, there is greater opportunity to undertake research programs.
Disadvantages of public limited liability company (or joined stock company)
- Lack of privacy: Public limited liability companies lack privacy because they are mandated by law to publish their annual audited account to the public. This makes it impossible for them to maintain secrecy or privacy.
- Conflict of interest: There is the possibility of conflict of interest among the shareholders, directors and staff, which may affect the efficiency of operations of the business.
- Slow decision making: Decision making is slow because of wider consultations and discussions in the management hierarchy.
- Separation of owners from control: The owners of the business (shareholders) have little or no say in the affairs of the business, while the people at the helm of the affairs who are not the owners may not put in their best.
- Hard to establish: The procedures and formalities involved in the registration are very hard and complicated.
- Payment of large corporate tax: They are saddled with every task burdens, arising from profit declared.
- Lack of flexibility: The company can only carry on business provided for it in its object clause in the memorandum of association. It cannot venture into any other type of business.
- Decrease in personal interest: The type of interest exhibited in this type of company is usually very low compared with the sole proprietorship where the zeal and interest is very hard.
- Large capital requirement: The capital required to set up and run a joint stock company is usually very large.
Conclusion on the advantages and disadvantages of public limited liability companies PLC
A Public Limited Liability Company offers significant benefits, such as access to large capital, limited liability, and enhanced credibility. However, these advantages come with challenges like regulatory burdens, loss of control, and public scrutiny. Businesses considering this structure should carefully weigh these pros and cons in the context of their long-term goals and resources. While the PLC model is ideal for large companies with ambitious growth plans, it may not suit smaller businesses or those that prioritize privacy and control.