Private Limited + Public limited company

Question 1

2 characteristics Private Limited Company

Answer 1

• Company that can only raise share capital from friends and family, rather than the general public.
• Shareholders have limited liability, meaning their financial responsibility is limited to the value of their shares.

Question 2

3 characteristics of Public Limited Company

Answer 2

• Company that is able to advertise and sell its shares to the general public via the stock exchange.
• This means they also need to have absolute transparency and publish their financial information publicly.
• Shareholders have limited liability

Question 3

3 advantages of Private limited company

Answer 3

• Shareholders have limited liability
• More control over ownership. Shares can only be sold to a person when approved by other existing shareholders.
• The business becomes a separate legal entity meaning it can continue to exist and operate on its own

Question 4

2 disadvantages of Private limited company

Answer 4

1. Shares cannot be be freely traded to the public making it more challenging to raise capital.
2. Private limited companies have to comply with legal formalities like maintaining proper records which can be time-consuming and costly

Question 5

3 advantages of Public Limited Company

Answer 5

• They can more quickly raise capital since their shares can be freely traded on the public stock exchange
• Boosted credibility/reputation after being visible on the stock exchange. Easier to gain trust from investors and customers
• Shareholders have limited liability

Question 6

2 disadvantages of Public Limited Company

Answer 6

1. Public limited companies have to comply with strict legal formalities, like maintaining detailed audits, which is time consuming
2. Potential loss of control since the shares are publicly available for everyone to purchase