Private & Public Ltd Companies (AQA GCSE Business)

Private Limited Companies (Ltd)

• A private limited company is a business that is owned by one or more shareholders whose responsibility for debts is limited to the level of their initial investment (the price they paid for their shares)

  • The business name is suffixed with 'Limited' or 'Ltd' in the UK

  • Shareholders are often family members or close friends

  • Shareholders are usually also directors who run the business on a day-to-day basis

  • Private limited companies are registered with Companies House and need to submit details of financial performance and changes in ownership each year

Diagram: Examples of UK-based Private Limited Companies

Some of the UK's best-known businesses, including River Island, JCB and Specsavers operate as private limited companies

• Private limited companies may be more suitable than sole traders or partnerships if setting up the business involves significant capital investment, or involves some risk

  • The owners personal assets are protected as they have limited liability

  • Most private limited companies are owned and controlled by just one person (just like sole traders) who has made the decision to reduce their personal financial risks

• Some large businesses choose to remain as private limited companies

  • Family shareholders can retain control over the business

  • Shareholders prefer to avoid the scrutiny that comes with flotation

  • They may have little need to raise large sums of capital and can fulfil their objectives as a private limited company

Advantages and Disadvantages of Private Limited Companies

Public Limited Companies (Plc)

• Public limited companies are large businesses that sell shares publicly on the stock exchange

  • Public limited companies have the suffix 'PLC' in the UK

  • Selling shares on the stock exchange for the first time is called flotation or going public

  • Flotation is a complex legal process that allows large amounts of share capital to be raised

    • E.g. London Tunnels, which turns unused Second World War walkways and shelters into tourist attractions, expected to raise £30 million through its flotation in early 2024

Advantages and Disadvantages of Public Limited Companies