1. What Are Public Companies?
2. Public Company Advantages

The difference between a public corporation and public limited company has to do with location. Public limited companies are formed and sell stock in the United Kingdom. Public corporations, on the other hand, form and sell their stock in the United States.

What Are Public Companies?

Public companies are companies that have permission to sell their stock to the general public on the stock market. Once they receive permission, public companies make an initial public offering (IPO) of registered securities. However, public companies cannot immediately start doing business after their Certificate of Incorporation gets approved. Before business operations can begin, a public company must also obtain a trading certificate.

Corporations are considered legal persons, which means they have their own debts and tax liabilities. Investors in a corporation cannot lose their personal assets in a lawsuit against the company.

One of the main reasons that the corporate business structure is so popular is that the corporate tax rate is usually lower than the personal tax rate. That said, a corporate investor's tax obligations can depend on several different issues:

  • The personal tax rate of the investor.
  • How much income the investor earns from the corporation.
  • If the investor has other sources of income.

Tax rates at both the personal and corporate levels can fluctuate based on many issues, including the state of the economy, the current U.S. president, and which political party is in control of Congress. The current tax climate can be a determining factor in whether a business should structure as a corporation or a limited liability company (LLC).

A public corporation differs from a private corporation in terms of how it issues stocks. Through an IPO, a public corporation will sell its stock to the general public. Stock is sold on at least one major stock exchange but can be sold on multiple exchanges. Before a public corporation can make an IPO, it must disclose company information and describe the shares that will be sold. Public corporations must also comply with the listing requirements of the stock exchange on which its shares are sold. A private corporation's stock cannot be publicly traded.

Public corporations are companies in the United States. Public limited companies are companies that publicly trade their stock in the United Kingdom. “Going public” is when a corporation makes an initial public offering. IPOs can be very profitable but can also be very risky if the company doesn't sell enough shares. Financial statements of a public corporation must be accessible by the general public.

Public Company Advantages

There are numerous advantages to forming a public limited company. Public limited companies must have at least seven members before offering shares. A public limited company can have an unlimited number of members. As the name suggests, a public limited company offers limited liability protections. Shareholders cannot be held personally liable for the debts of the company, as the company is a legal entity unto itself.

A board of directors is responsible for running a public company. On the board, there can be as many as 15 directors, but there must be at least three. Shareholders of the company elect the board of directors. Electing the board takes place at the annual shareholders meeting. Company directors represent the interests of the shareholders and make decisions for the company. In general, having a larger board of directors is a good idea because it creates transparency and accountability.

Unlike private companies, public companies must make their financial statements publicly available. This means that shareholders will always be able to get a clear picture of the company's financial standing. Public disclosure of financial statements also makes it easier to determine the value of a company's shares.

Raising capital is much easier for a public company than a private company. When a public limited company needs capital, it can simply offer more of its shares on the market. Public companies also have the ability to issue bonds in order to raise capital. Another advantage of public limited companies is that shares are easily transferrable. They can be bought and sold on a public stock exchange, and they are easily transferred between company members.

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