1.2 Choosing the Right Legal Structure

Question 1

What is the difference between a LTD and a PLC?

Answer 1

Private Limited Company (LTD):
Has Limited Liability (Sold to invited people)
Owned by Shareholders
Small Businesses

Public Limited Company (PLC):
Has Limited Liability (Sold to anyone public)
Large Successful Business
Owned by Shareholders

Question 2

What are the advantages and disadvantages of a Private Limited Company?

Answer 2

Advantages:
Easier to attract investors
More ideas and expertise within the business
Easier to set up than a PLC
Limited Liability

Disadvantages:
More expensive to set up
Decisions have to be shared amongst directors
Investors might expect a share of profit

Question 3

What are the advantages and disadvantages of a Public Limited Company?

Answer 3

Advantages:
Limited Liability
Best ways to raise large sums of money to expand business
Better image status
Easier to attract better workers

Disadvantages:
People threat that someone will buy enough shares to takeover company
Shareholders might expect a share of the profit
Expensive to set up
Accounts have to be published every 3 months

Question 4

What is Flotation?

Answer 4

The process of offering a companies shares for sale on the stock market

Question 5

What is the Stock Market?

Answer 5

An area where commercial dealings are conducted