Key Takeaways

  • In business, PLC stands for Public Limited Company, a structure that allows shares to be offered to the public with limited shareholder liability.
  • PLCs are most common in the UK and other Commonwealth countries, similar to U.S. corporations.
  • PLCs must meet strict legal requirements, including minimum share capital, public reporting, and adherence to securities regulations.
  • Advantages include easier access to capital, enhanced public credibility, and shareholder risk limited to their investment.
  • Disadvantages include higher costs, more regulatory oversight, and potential for loss of control by original owners.

Business Entity

A business entity is an organization entity created and operated according to commercial law to conduct business activities.

Sole Proprietor

A sole proprietor is a person who is the owner of a business which is unincorporated. This type of business cannot exist as a legal entity, but refers to the owner of the company who is personally liable for its debts.

Are the Assets of a Sole Proprietor Protected?

The assets of the owner are subject to the liabilities of a sole proprietorship business.

Partnership

A partnership refers to a business formed by two or more persons who share the management of the business, its profits, and are personally liable to the business. Partnerships don't pay income tax as the profits and losses of the business are passed to its partners. Individual partners then add their own share of the partnership's profit or loss when filing their personal tax returns.

Are the Assets of the Partners Protected?

All the assets of each partner which are not nonexempt are subject to the liabilities of the partnership business.

Corporation

A corporation is a legal entity that can exist independent of its owners. A corporation is considered to be a legal "person" which can perform business transactions and sign contracts with members of the public, can be taxed, and can file lawsuits and be sued.

Board of Directors

A board of directors is responsible for choosing and overseeing the management team who run the operations of the corporation on a daily basis.

Shareholders

Shareholders are individuals who hold ownership interests of a corporation by buying the stocks of the company.

Are the Shareholders Liable for the Corporation's Debts?

The shareholders of a corporation are not personally responsible for the company's debts as corporations have limited liability.

How Is a Corporation Taxed?

A corporation is taxed based on whether the business is a C corporation or an S corporation.

  • C corporations pay taxes on their profit based on corporate rates, and shareholders also pay tax on their share of the corporation's profits, which is paid as dividends.
  • S corporations pass the total net income to shareholders, while the corporation does not pay any tax. For more information about taxing S corporations.

LLC

An LLC is a business entity which has the components of both a partnership and a corporation as it has the limited liability of a corporation and the pass-through taxation of a partnership.

Members

The people who own interests in an LLC are known as members.

What Document Governs an LLC?

An LLC is administered with an operating agreement.

Professional Limited Liability Company

PLC and PC are abbreviations of professional limited liability company and professional company respectively.

Professional Limited Liability Company

These are entities that offer licensed professional services, like health care professionals, attorneys, accountants, and engineers.

Private Limited Company

This is an entity whose stocks cannot be purchased by the general public. A small group of individuals owns the stocks of this company. The name of these entities usually ends with Pvt. Ltd.

Subsidiary

A subsidiary is a company which is owned or controlled by another company. The subsidiary can be a limited liability company, company, or corporation. Sometimes, a subsidiary is owned by the government.

Chartered Company

A chartered company is an association created by shareholders or investors with the aim of colonization, exploration, or trade.

What Is a Public Limited Company (PLC)?

A public limited company (PLC) is a limited liability company (LLC) which has limited liability and whose shares can be bought by the general public.

The stock of a PLC can be purchased by anybody either publicly on the stock market, during initial public offerings, or privately.

Generally, PLC is more common to companies in the United Kingdom and other Commonwealth countries, however, businesses in the USA and other places mostly use "Ltd" and "Inc."

The obligatory inclusion of the PLC abbreviation after a company's name helps to quickly show investors and other people interested in the company it is a publicly traded company with relatively large operations.

PLC vs. Other Business Structures

When evaluating whether to form a PLC, consider how it compares to other entities:

  • Private Limited Company (Ltd or Pvt Ltd): Ownership is limited to private shareholders; shares are not offered publicly, resulting in lower compliance obligations.
  • Corporation (Inc. or Corp. in the U.S.): Functionally similar to a PLC but typically governed by U.S. state law; public corporations follow SEC rules.
  • LLC (Limited Liability Company): Offers flexible management and pass-through taxation but does not provide public share issuance.

Entrepreneurs often choose a PLC when they need access to large-scale funding and are prepared for the heightened public scrutiny and regulation.

Disadvantages of a PLC

While PLCs offer significant advantages, they also come with potential downsides:

  • Increased Regulatory Burden: PLCs face strict reporting, auditing, and disclosure obligations.
  • High Costs: Legal, accounting, and compliance expenses can be substantial.
  • Loss of Control: Founders may lose some decision-making power as shares are dispersed among public shareholders.
  • Market Pressure: The need to satisfy shareholders and maintain stock value can influence strategic decisions.
  • Risk of Takeover: Publicly traded shares can be acquired by external parties, potentially leading to hostile takeovers.

Understanding these trade-offs helps business owners determine whether becoming a PLC aligns with their growth and control objectives.

Advantages of a PLC

Forming a PLC offers several benefits for business growth and public engagement:

  1. Access to Capital: PLCs can raise funds by issuing shares to the public, making it easier to finance expansion or new projects.
  2. Enhanced Credibility: Publicly traded companies often enjoy increased trust and visibility, which can attract investors, suppliers, and customers.
  3. Shareholder Liquidity: Shares can be bought and sold on the open market, offering investors flexibility.
  4. Limited Liability: Shareholders are only liable for the amount they have invested, protecting their personal assets.
  5. Potential for Mergers and Acquisitions: Public status can make it easier to negotiate strategic partnerships or acquisitions.

Requirements for Forming a PLC

To qualify as a public limited company, a business must meet specific statutory requirements:

  • Minimum Share Capital: In the UK, a PLC must have at least £50,000 in share capital, with a portion paid up before trading.
  • Share Offering: Shares must be freely transferable and can be offered to the public through a stock exchange or private placement.
  • Company Officers: A PLC must have at least two directors and one qualified company secretary.
  • Registration & Compliance: The business must register with the appropriate corporate authority (like Companies House in the UK) and comply with ongoing filing and reporting obligations.
  • Annual General Meetings (AGMs): PLCs are required to hold AGMs for shareholder participation and decision-making.

These requirements ensure that public investors are protected and that the PLC maintains financial transparency.

Frequently Asked Questions

1. What does PLC stand for in business? PLC stands for Public Limited Company, a business structure where shares are offered to the public with limited shareholder liability.

2. How do I form a PLC? You must register the company, meet minimum share capital requirements, appoint required officers, and comply with public reporting obligations.

3. What are the main benefits of a PLC? Key advantages include easier access to capital, enhanced credibility, shareholder liquidity, and limited liability for owners.

4. What are the risks of operating as a PLC? Disadvantages include strict regulation, high compliance costs, market pressure, and risk of loss of control through share dilution.

5. Is a PLC the same as a U.S. corporation? They are similar in structure, but PLCs are primarily used in the UK and Commonwealth countries, while U.S. companies use “Inc.” or “Corp.”

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