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In the UK, there are two different types of company: private limited companies (Ltd) and public limited companies (plc). They are both owned by shareholders and both have limited liability.

Private limited company (Ltd)

A private limited company can be a small or large business. The owners of a private limited company are known as shareholders. Shareholders have to be invited by the business before they can purchase a share of the business. A share is a portion or percentage of a company.

Some advantages of a private limited company include:

• the owners have limited liability
• it can improve the status of the business
• any new shareholders have to be invited, which protects the business from outside influence
• if the founder dies, the company still exists and is controlled by the shareholders

Some disadvantages of a private limited company:

• there is often more paperwork
• in some instances, other people are able to view the business’ financial information
• it can be very time consuming to set up
• the business may require outside professional help to manage its finances

Public limited companies

A public limited company can sell its shares on the stock exchange. A flotation occurs when a private limited company wants to become a public limited company. Because shares are sold to the general public there is often more media coverage of public limited companies.

Some advantages of a public limited company:

• shares can be sold to the general public which means there are a large number of potential investors
• more media coverage which is good publicity
• shares can be bought and sold easily

Some disadvantages of a public limited company:

• negative media coverage can damage their reputation
• at risk of being taken over as they cannot control who buys their shares
• more regulation than a private limited company which can increase costs
• shareholders get a vote in the business and may have different objectives than the original owners