Types of organisations

Question 1

Private limited companies are…

Answer 1

Owned by shareholders who are invited to buy shares

Question 2

Public limited companies are…

Answer 2

Owned by shareholders who purchased shares on the stock market

Question 3

Advantages of LTD x4

Answer 3

Shareholders must be invited, meaning the business cannot be subject to hostile takeover
Limited liability means that the business will not lose personal assets only what is invested in the company
Owner keeps control of the organisation
Don’t have to disclose info annually

Question 4

Disadvantages of LTD x4

Answer 4

Workers demotivated if they don’t have shares
Hard to raise finance as not advertised on the stock market
High legal costs e.g. memorandum and articles of association
Profits have to be shared to all shareholders who receive the dividend

Question 5

Advantages of PLC x4

Answer 5

Large amount of finance can be raised to shares are advertised on stock market
Limited liability
Economies of scale
Shares can be resold on stock exchange

Question 6

Disadvantages of PLCs x4

Answer 6

Could go to big making them hard to manage efficiently
Have to disclose some financial information which public and competitors can see including annual reports
Threat of takeover
Must register with the registrar of companies which can be costly

Question 7

Similarities between PLC + LTD x5

Answer 7

Limited liability
Owned by shareholders
Controlled by Board of Directors
Hold AGM
Complete memorandum and articles of association

Question 8

Differences between PLC + LTD x3

Answer 8

LTD- no min start up capital
PLC- 50,000 min start up capital
LTD- shareholders invited to buy shares
PLC- shares sold on stock market
LTD- 1 min director, 1 min shareholder
PLC- 2 min directors, 2 min shareholders and 1 company secretary