Private & Public Ltd Companies (AQA GCSE Business)
Revision Note
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
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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
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Examiner Tip
A common misconception is that private limited companies are large. They could be large businesses but equally, they can consist of just one key shareholder who has chosen this legal structure as a way to protect their personal assets with limited liability.
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