company law 3 Flashcards
(6 cards)
1
Q
what is a private limited company?
A
- privately owned, meaning its shares are not available to the general public on the stock exchange.
- Instead, shares are held by a small number of individuals (often family, friends, or business partners).
2
Q
✅ Pros of a Private Limited Company:
A
- Limited liability
- Separate legal entity
- Credibility and professionalism
- Tax efficiency
Corporation tax rates can be lower than personal income tax, and there’s flexibility in how directors are paid (e.g., salary + dividends). - Easier access to funding
3
Q
❌ Cons of a Private Limited Company:
A
- More admin and costs
Companies must register with Companies House, file annual accounts, and follow stricter record-keeping rules. - Less privacy
- Profit sharing - Profits must be shared with shareholders
- Formal structure
Decisions may require agreement from directors/shareholders, which can slow down processes compared to sole traders or partnerships. - Regulatory obligations
4
Q
💼 What is a Public Limited Company (PLC)?
A
- Sell its shares to the public on the stock exchange.
- limited liability
- generally larger
- more heavily regulated
- publicly traded.
5
Q
✅ Pros of a Public Limited Company:
A
- Access to large amounts of capital
- Prestige and public profile
- Share transferability - Shares can be easily bought and sold, offering liquidity for investors.
- Growth opportunities - Easier to finance expansions, mergers, and acquisitions due to increased capital.
- Limited liability
6
Q
❌ Cons of a Public Limited Company:
A
- Increased regulation
- Loss of control - if bought out of shares
- High costs - Going public and staying listed (e.g., via an IPO and compliance) can be very expensive.
- Vulnerability to market conditions - Share prices can fluctuate based on market sentiment, not just company performance.
- Pressure from shareholders
Short-term shareholder interests may sometimes conflict with long-term company goals.
