Public Vs Private limited companies Flashcards
Characteristics of public limited companies
Shares on the stock exchange (anyone can buy them)
Ceo is often not original founder of the company
ownership is divided across numerous people who are not linked to the company
Shareholders own the company
characterisitcs of private limited company
Shares cannot be sold on the open market (stock exchange)
Usually small to medium-sized companies
Limited liability
shareholders are legally responsible for the debts of a company
Unlimited liability
Unlimited liability refers to the full legal responsibility that business owners and partners assume for all business debts.
(Sole traders/partnerships, Ex. sole trader owes money to the a company but does not have the money to pay back the company. The company is legally allowed to take personal assets of the person and liquify them into money covering the debts.)
Personal assets can consist of anything the business owner owns (Kitchen table, car, House)
Pro’s and Con’s of a public limited company
Pros:
Limited Liability
Can raise large amounts of capital
Easy for shareholders to trade shares
Continuity - business doesn’t stop if owner passes away
Cons:
Short-termism of shareholders
More legal requirements
Lack of financial privacy - anyone can look at their accounts
Costly legal requirements of going public
Risk of takeover
Pro’s and Con’s of private limited companies
Pros:
Limited Liability
The original owner often remains in control
Can raise large amounts of capital
Continuity - business doesn’t stop if the owner passes away
Cons:
More legal requirements
Cannot sell shares to general public
Lack of financial privacy
