Here you will find the Public Limited Company definition and its advantages and disadvantages. This article is drafted in simple words. I am sure you will understand the concept easily.
What is a Public Limited Company?
A public limited company means a company that is not a private company. When a public company wants to expand its assets by going to the public, it must first register on completion of listing requirements from the stock exchange. Once registered, the company is also known as a listed company.
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| What is a Public Limited Company? |
These companies are free to trade publicly. There is no restriction on shares. Moreover, there is no restriction on the maximum number of members.
What is a Listed Company?
A company listed on the stock exchange is called a listed company. A listed company is allowed to trade freely. A limited company should have at least seven directors and no limit for the maximum number of directors.
Read More: Top Classification of Law
Public Limited Company Advantages and Disadvantages
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| Public Limited Company Advantages and Disadvantages |
Now let's understand the different advantages and disadvantages of a public limited company or listed company:-
Read More: Difference between Public Company and Private Company
Advantages of Public Limited Company
- The main characteristic of a public limited company or listed company is that they trade their shares freely through the stock exchange.
- The shares of a public limited or listed company are easily transferable through the stock exchange from one person to another.
- In a public company, shareholders have limited liability. They are not liable for the company's debts. If a company becomes insolvent, its shareholders are not responsible for any of the company's liabilities.
- Another advantage is their ability to be more efficient organizationally. Since the company has a well-established organizational structure, most departments usually operate at their best standards.
- More capital to do business in a listed company compared to any other private sector business. These companies have more opportunities to extend their business because they sell their shares through the stock exchange market. Due to this reason, they can accumulate more capital to do business.
Public Limited Company Disadvantages
- Decisions can take longer than in private companies, and there can be disagreement among shareholders or directors.
- Profit share among many people. We know that the public limited company sells shares through the stock exchange market and distributes dividends. The company is legally obligated to pay all of its shareholders. Profit will be distributed among all shareholders or divided into smaller portions which will have another disadvantage for a public limited company.
- Setting up is very costly because we know that these companies are large-size and need more capital to do business.
- Listed companies might experience difficulty in managing because this is a large business. They need better managerial skills to manage their business. Sometimes they face problems in operating the business.
Conclusion
A public limited company is not a private company. When it registers on the stock exchange, it becomes a listed company. In a public company, there must be a minimum of 7 members, and there are no limitations on the maximum number of members. These companies openly trade, and transferring shares is very easy. The managerial abilities of companies are more efficient and have more opportunities to extend their capital compared to private limited companies. These companies make longer-term decisions and share profits among many members. Starting a new company is very costly, relative to private companies.
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