What is a Public Limited Company? And Public Limited Company Advantages and Disadvantages

Introduction

A Public Limited Company is a Business Structure in which investors can purchase shares. In today’s world, many businesses choose to operate as Public Limited Company because they offer certain tax advantages. This article mainly focuses on the Public Limited Company Advantages and Disadvantages.

Before going through the advantages of Public Limited Company and Disadvantages of Public Limited Company. Let’s have a quick look at “What is a Public Limited Company?”

What is a Public Limited Company?

Under the Company Act 2013, a Public Limited Company is one that has limited liability and sells shares to the public. Anyone can buy its stock, either privately through an Initial Public Offering (IPO) or publicly through stock market exchanges. A Public Limited Company is governed by tight regulations and must disclose its true financial health to its shareholders.

Public Limited Company Features

• The Public Limited Company is favored because, under the Companies Act of 2013, it has its own legal existence.

• A Public Limited Company has a broad legal ability to possess property and incur debts. This is because the company’s members, both owners, and directors, have no accountability to the company’s creditors.

• A Public Limited Company’s shares are easily transferable to anyone; all that is required is the submission and signing of a share transfer form.

• A company is a legal entity capable of acquiring, owning, enjoying, or transferring property in its own name. This ensures that the stockholders cannot claim the property while the business is open for business.

Public Limited Company Advantages and Disadvantages

Advantages of Public Limited Company

• Transparency

A Public Limited Company is praised for its business transparency. The company is legally obligated to reveal its information and reports, such as quarterly or annual Accounts and financial reports describing its current financial status, due to the public’s engagement. Thus, a Public Limited Company is more transparent in terms of other Business Structure.

• Members have a Limited Liability

The shareholders and directors benefit the most from a public limited corporation because they are not exposed to additional liabilities. Furthermore, because shareholders and directors’ liability is limited to the value of the business’s shares, they are protected from losing their assets if the firm suffers a financial loss.

• Freely Transferable of Shares

A stock exchange market is where public limited company shares are purchased and sold. They can be freely transferred between its members and the stock exchange market.

• Ability to raise more fund

Because they can issue shares to the public through the stock market, Public Limited Company have a greater ability to raise funds. They can also raise money from the public by issuing debentures and bonds through the same market. Debentures and bonds are unsecured debts issued to a firm based on its financial performance and integrity.

• Better financial opportunities

A public corporation has the ability to attract more investors than a private limited company. Because of various characteristics, including transparency, banks and other financial institutions are more willing to provide financial support to a PLC. A public limited corporation has a higher chance of obtaining favourable interest rates and loan repayment arrangements.

Disadvantages of Public Limited Company

• Lack of confidentiality

To retain shareholder trust and transparency, the corporation makes full disclosure to the public, making concealment impossible to sustain. Because the public is involved in decision-making, the corporation is unable to maintain confidentiality.

• Expensive Business Form 

The expense of registering the corporation as a public company is enormous. To launch a public firm, a significant amount of money, time, and procedures must be followed. The company’s profit is determined by the investment you make.

• Lesser Flexible as compared to other business structures

Flexibility is always a plus for any firm, but there is no such advantage in the case of a public company. Every public company is bound by rules and regulations, resulting in a lack of operational flexibility.

Conclusion

Every element has advantages and disadvantages. The benefit of the PLC (Public Limited Company) is obvious to everybody; nonetheless, some public company disadvantages cannot be overlooked. Public company registration makes shares available to the public, which opens up more business options. The formation of a public company provides extra revenue potential through the sale of new shares to the public.