Limited companies account for over 96 percent of all businesses incorporated in the United Kingdom. This legal structure offers numerous benefits including a separate legal identity for the company and limited liability for the company's owners. There are two types of limited companies: private limited companies (abbreviated "ltd") and public limited companies (abbreviated "plc"). Public limited companies can sell their shares to the public when they need to raise investment. Private limited companies can only sell shares to private investors and their shares are not listed on the stock exchange markets.
TL;DR (Too Long; Didn't Read)
While their primary goal is to generate profit and maximize shareholder value, public limited companies can focus on increasing brand awareness, building customer loyalty and more.
What Is a Limited Company?
This type of company incorporation is common in the UK and other countries such as Canada, Cyprus, Finland and Germany. Currently, there are over 3.7 million limited companies registered in the UK alone. While most businesses are privately owned, some prefer to go public and list their shares on a stock exchange.
A public limited company has its own legal status, so there's a clear distinction between the business and its owners. Its profits are subject to corporation tax, and its shares may be traded or sold to the public in order to raise capital. Business owners who decide to list the company on the London Stock Exchange are required to have a minimum of £50,000 of authorized share capital.
Main Goal Is to Generate Profit
The primary goal of public liability companies is to generate profit in order to maximize shareholder value. For example, its founders may focus on expanding the business year after year or increasing its market share. Another common goal is to maximize profits by reducing costs and generating sales. A public limited company can raise more money by being a PLC than by any other corporate structure. This extra capital allows the business to expand into new markets, innovate new products and achieve rapid growth.
Brand Recognition and Other Goals
Like any other business, a PLC can have other goals besides making money. Some PLCs commit to environmental causes and prioritize sustainable development. Some put emphasis on corporate social responsibility. Others try to achieve a stable growth rate so they survive on the market for as long as possible.
Brand recognition is a priority for many PLCs. Once listed on a stock exchange, the business is seen as having greater prestige. This helps build customer trust, attracts investors and makes it easier to recruit top talent. Besides going public, a company can increase brand awareness by getting involved in social programs, developing quality products that fill a gap in the market or having a solid marketing strategy in place.
Long-term financial stability depends on a multitude of factors other than profit. As a business owner, you need to take calculated risks, survive in competitive markets and increase customer satisfaction. At the same time, it's important to ensure that your products deliver value and keep up with the latest technology trends.
Disadvantages of a Public Limited Company
Public limited companies are a lot more expensive to set up than private companies and they have major disclosure requirements as a condition of listing on a stock exchange. This means that competitors can easily get hold of information that the business would prefer to keep private, such as financial records. Since shares are offered to the public, someone could easily buy enough shares to take over control of the entire company.
- AccountingWEB: Companies House
- Investopedia: What Are the Requirements for Being a Public Limited Company?
- GOV.UK: Companies Register Activities 2017 to 2018
- nibusinessinfo.co.uk: Starting a Public Limited Company
- Inform Direct: Advantages and Disadvantages of a Public Limited Company
- Time.com: Why Shareholder Value Should Not Be the Only Goal of Public Companies
- Legislation.gov.uk. "Companies Act 2006." Accessed August 27, 2020.
- Gov.uk. "Running a limited company." Accessed Sept. 7, 2020.
- Gov.uk. "Set up a limited company: step by step." Accessed Sept. 4, 2020.
- NIBusinessInfo.co.uk. "Legal structures for businesses - an overview." Accessed Sept. 4, 2020.
- Internal Revenue Service. "Instructions for Form 1120," Page 2. Accessed Sept. 6, 2020.
Andra Picincu is a digital marketing consultant with over 10 years of experience. She works closely with small businesses and large organizations alike to help them grow and increase brand awareness. She holds a BA in Marketing and International Business and a BA in Psychology. Over the past decade, she has turned her passion for marketing and writing into a successful business with an international audience. Current and former clients include The HOTH, Bisnode Sverige, Nutracelle, CLICK - The Coffee Lover's Protein Drink, InstaCuppa, Marketgoo, GoHarvey, Internet Brands, and more. In her daily life, Ms. Picincu provides digital marketing consulting and copywriting services. Her goal is to help businesses understand and reach their target audience in new, creative ways.