Key Takeaways

  • A PLC (Public Limited Company) is a corporate structure that allows for public share offerings, while an LLC (Limited Liability Company) is a private business structure offering flexible management and pass-through taxation.
  • PLCs face stricter regulatory requirements, including disclosure obligations and shareholder voting structures.
  • LLCs offer more flexibility, easier formation, and simpler compliance obligations, making them ideal for smaller or closely held businesses.
  • While both structures provide limited liability protections, only PLCs can raise capital by selling shares to the public.
  • Choosing between an LLC and PLC depends on factors like ownership goals, fundraising needs, regulatory tolerance, and management preferences.Understanding the differences between LLC vs. PLC structures is important when establishing a business. LLC stands for "limited liability company," while PLC refers to a "public limited company."

Understanding the differences between LLC vs. PLC structures is important when establishing a business. LLC stands for "limited liability company," while PLC refers to a "public limited company."

Differences Between an LLC and a PLC

An LLC is a privately owned business while a PLC is one that is publicly traded on the stock market. Each state has its own rules and restrictions regarding LLCs and PLCs, and not every business entity is available in every state.

An LLC is a common business entity formed under state law. Certain states allow specialized LLCs, such as a professional limited liability company (PLLC). An LLC is unincorporated, so owners (who are referred to as "members") can be:

  • Individuals.
  • Other LLCs.
  • Corporations.

A public limited company (PLC), by contrast, can sell shares to the public.

Similarities Between an LLC and a PLC

To become a PLC, a company must also be an LLC. Both LLCs and PLCs provide owners with liability protections against business-related debts and lawsuits.

In both cases, taxation is similar because each enjoys "pass-through" taxation. This means the company's profits and losses pass through the company to the owners, who then report the finances on their personal tax returns.

Business Use Cases for LLCs vs PLCs

Understanding when to choose an LLC vs PLC depends on your business’s size, goals, and industry:

  • LLCs are often used for:
    • Small to midsize businesses
    • Family-owned companies
    • Professional service firms (doctors, lawyers, consultants)
    • Startups in early stages seeking operational simplicity
  • PLCs are commonly used by:
    • Large corporations with global operations
    • Businesses preparing for or undergoing IPOs
    • Entities requiring frequent external investment

The llc-vs-plc decision should be made based on the company's scale, compliance readiness, and access to capital markets.

Limited Liability Companies: An Overview

An LLC is considered a hybrid business entity between a partnership and a corporation. LLCs provide members with a flexible management structure similar to a partnership. Unlike a partnership, the members are not personally responsible if:

  • The LLC is sued.
  • It cannot pay its debts.
  • It goes bankrupt.

The only thing members are liable for is the amount they personally contributed to the business. For example, if a member invested $2,000 of his or her own money to help start the business, the member may not get this back if the LLC goes under.

There are no limitations on who can become an LLC member. In fact, it may be owned by:

  • A single person.
  • Multiple members.
  • Other business entities. 

Some states, however, do restrict the type of businesses that can form LLCs. Certain professional fields, for example, are barred from starting an LLC.

To summarize, the main benefits of starting an LLC include:

  • Pass-through taxation.
  • Corporate-style limited liability protections.

Professional Limited Liability Companies: An Overview

A professional limited liability company (PLLC) — not to be confused with a public limited company (PLC) — is the type of LLC licensed professionals use. A PLLC has a similar Articles of Organization, but extra steps are required to form the PLLC. For starters, the licensed professionals forming the business must sign the filing documents and include certified copies of their professional licenses or license numbers.

You must also submit these documents to the licensing board before filing them with the Secretary of State. As such, approving a PLLC takes longer than a standard LLC. You must also include proof that every member of the PLLC is professionally licensed.

In most states, PLLC members remain liable for malpractice claims. However, you may not be liable for another member's actions.

Forming an LLC Versus Forming a PLC

You can form an LLC by filing your Articles of Organization with your Secretary of State and paying the required fees. Forming a PLC, on the other hand, requires two or more directors or shareholders agreeing to establish the public limited company.

These directors must file an Articles of Association or a Memorandum of Association regarding how the PLC will be governed. They must then register the LLC as a PLC and sell shares to the public.

Capital Raising and Investment Access

One of the most significant distinctions in the llc-vs-plc comparison is the ability to raise capital:

  • PLCs can issue shares to the public, making them attractive to investors and ideal for businesses seeking significant capital infusions.
  • PLCs may list on a public stock exchange, opening access to institutional investors and global capital markets.

LLCs, however:

  • Cannot offer shares to the public and must rely on private investment or member contributions.
  • Are better suited for businesses that prefer to keep ownership concentrated among a few stakeholders.

Management Differences

An LLC is member-managed, meaning the owners manage all business operations and activities. With a PLC, a single director or a board of directors makes the management decisions.

All LLC members are accountable for the company's obligations, but each one enjoys protection against debts and wrongdoings. Similarly, PLC shareholders and directors are not liable for company debts. However, they must be accountable for any personal loans owed to the business.

Ownership and Share Transferability

  • In an LLC, ownership is represented by membership interests, which are not freely transferable. Members typically must approve any ownership changes.
  • In contrast, PLC shares are freely tradable, especially when listed on a public exchange. This feature allows for greater liquidity and attractiveness to investors.

This distinction is important in llc-vs-plc comparisons: LLCs offer privacy and control, while PLCs provide investment flexibility and transferability.

Tax Differences

The IRS doesn't formally recognize LLCs and PLLCs as taxable entities. Instead, the business must file as:

  • A single-member LLC.
  • A partnership.
  • A corporation.
  • An S corporation.
  • A multi-member LLC.

PLC shareholders and directors are subject to double taxation. Like an LLC that chooses C corp status, a PLC is taxed once on the company's income and again on individual dividends.

Regulatory and Compliance Obligations

PLCs are subject to more stringent regulatory obligations compared to LLCs. These include:

  • Public disclosures: PLCs must regularly disclose financial reports, shareholder updates, and governance decisions to regulatory authorities and the public.
  • Auditing: Annual audits by independent auditors are typically mandatory.
  • Listing requirements: If a PLC is publicly traded, it must meet stock exchange rules, which may include minimum market capitalization and financial thresholds.
  • Corporate governance: PLCs usually must maintain a board of directors, shareholder voting processes, and detailed corporate bylaws.

In contrast, LLCs are privately held and only need to comply with state-level requirements. These typically involve:

  • Filing an annual report or statement of information
  • Paying renewal fees
  • Maintaining a registered agent

Frequently Asked Questions

1. Can an LLC become a PLC? Not directly in the U.S. context. An LLC would need to reorganize into a corporation first, then go public as a PLC equivalent.

2. Which is better for startups, LLC or PLC? LLCs are better for startups due to flexibility, fewer regulations, and tax simplicity. PLCs are suited for large-scale enterprises needing public investment.

3. Are PLCs taxed more heavily than LLCs? Yes. PLCs face double taxation (corporate and shareholder level), while LLCs can use pass-through taxation unless they elect corporate status.

4. Can a single person form a PLC? Typically, no. Most jurisdictions require at least two directors or shareholders to form a PLC.

5. Do PLCs offer more credibility to investors? Yes. Being a publicly traded entity often adds credibility, transparency, and investor confidence compared to privately held LLCs.

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