Key facts about public limited companies:
- a public limited company (PLC) sells shares to the public on the stock market
- this allows shareholders to become part owners and have a say in operations
- advantages include raising finance and limited liability
- disadvantages involve high setup costs, complex reporting, and risks of hostile takeovers
What are public limited companies (plc)?
As a business grows, it may choose to become a public limited company (PLC). In a PLC, A percentage or portion of a company. are sold to the public on the A centralised market where business shares are traded.. People who own shares are called shareholders. They become part owners of the business and have a voice in how it operates. A chief executive officer (CEO) and board of directors manage and oversee the business’ activities.
When a business sells shares on a stock market, this is known as ‘floating on the stock exchange’.
What are the advantages of being a PLC?
- the ability to raise additional finance through The money raised when a business becomes a public limited company by offering shares in the business in return for capital.
- the shareholders have When the business owner or owners are only responsible for business debts up to the value of their financial investment in the business.
- increased negotiation opportunities with suppliers in terms of prices because larger businesses can achieve Where the average costs (of production, distribution and sales) fall as the business increases the amount of product that it produces, distributes and sells.
What are the disadvantages of being a PLC?
- it is expensive to set up, requiring a minimum set up cost of £50,000
- there are more complex accounting and reporting requirements
- there is a greater risk of a A takeover of one company (called the ‘target company’) by another (called the ‘acquirer’) that is accomplished without the agreement of the target company’s management. Instead, the acquirer approaches the company’s shareholders directly or fights to replace the management to get the takeover approved. by a rival company as the company cannot control who buys its shares
- shareholders will expect to receive a percentage of the profits as A sum of money paid regularly by a company to its shareholders out of its profits.
- shareholders may clash when making decisions about the business
Different types of companies – LTDs and PLCs
Businesses discuss their status as a Private Limited Company or a Public Limited Company.
We Brits love nothing more than a weekend of music mayhem and mud. Festivals have become so popular that now over 400 take place every year. Reading is the oldest and attract some of the world's biggest names. But Reading is more than just a bit of fun it's a business and for the 200 or so companies that provide bottles of water and wacky sunglasses it's not opportunity to make a lot of money. And although they make the best experience that much better it's important to know that the company is not all running the same way.
To find out more I'm heading somewhere pretty special backstage. I'm meeting a man who provides something that you can't see or touch but without which, there definitely wouldn't be any music at all. Rob Hutchinson owns Innovation Power the company which provides all the electricity needed to run everything from the stage lights to the guitars.
This is the main stage supply there's not just one big supply to the stage has several supplies. You've got the sound the lights the video.
Not like plugging your hoover in?
Is it not like plugging the hoover in no no no at all.
So what would happen if I switched off one of these. I am iching too in a way, like I wanted I do something.
All those people out there would go very angry.
Really?
Yeah I'd be running off and that direction.
So the business of supplying power to Reading isn't straightforward and neither is the structure of Rob's company. That's because with an average annual turnover of 1.5 million pounds, Rob decided to make Innovation Power a private limited company. It's quite different to being a franchise or a sole trader.
The main difference is that an owner-like Rob has a separate legal identity from his business. That gives the business what's called limited liability which means should it go bust bosses like Rob would only lose the money invested rather than their own personal wealth. Also in terms of structure a limited company needs at least one shareholder the more shares you own the more control you have of the company.
We started in the 80s as a sole traders stroke partnership and in the 90s we've got busier we're picking a bigger and bigger events. Sat with the account and said what if it went wrong?
Here what's going to happen? He said well they might sue you. You see as you grow you need to protect what you've worked for and if you're not limited you know that suit of Armor on he's gonna lose everything you know you're gonna be out in the streets.Whats the big disadvantage to running a private limited company?Red tape, it's always red tape. Your finances are more complicated and you're account are published.
People can go to Companies House electronically download have a look at your accounts and see if your viable. Your open to scrutiny.
That's all pretty straightforward so far right however, there is one more important thing to know when discussing companies. There's actually more than one type of limited company. Limited companies can either be private limited companies like Robs, or public limited companies. Most of the ones around the festival site are private. it's all to do with who owns them. All companies are owned by a group of people known as shareholders.
In a private limited company, people can only buy shares if they've been invited to do so by the main shareholder. You can tell if a company's private because it will have the letters Ltd after its name. But in a public limited company anyone can buy shares which are openly traded on a stock exchange. So it's a good way of increasing investment and expanding quickly. These companies have PLC after their name. There are around 9,000 plcs in Britain and many of them are household names.
One of those Future PLC, publisher of some of the world's most popular music magazines with over 200 shareholders and multi-million pound profits it dwarfs innovation power. Stevie Springs is the boss.
The main advantages of being a plc are access to different lines of cash. So instead of just being able to go to the bank, we can go to our shareholders and get extra money to expand to grow the business.
It might be a good way of expanding but becoming a PLC involves even more transparency than private limited companies.
Everything from my salary to how much profit we make, to any company that we might be thinking of buying has to be announced to the public so that everybody who is buying or selling shares is doing it with the same information base.
So companies aren't as straightforward as you might think. They come in all shapes and sizes from private limited companies to plcs but they all have one thing in common and that is to make cash whether that's for two shareholders or a thousand
What is an IPO?
What is an IPO?
An initial public offering, IPO, is an important process for businesses looking to grow. Let's explore what an IPO is and who is involved in making it successful.
What is an IPO?
An IPO or initial public offering is when a company offers its shares to the public for the first time. Shares are units of ownership in a company, giving investors a stake in its success. This process is often referred to as floating on the stock market because it involves listing the company's shares on a stock exchange, making them available for public trading. An IPO helps the company raise money to grow and allows early investors to sell their shares for a profit. Going public through an IPO can bring major benefits, such as access to more capital and an enhanced company reputation. Shareholders also benefit from limited liability, meaning they only risk their investment, not their personal assets.
Why don't all businesses go public?
The formation of a public limited company involves a lengthy, complex procedure that requires careful planning and teamwork.
Who are the key stakeholders?
Investment banks: These experts help the company set a share price, connect with potential investors, and suggest the best time to launch the IPO.Legal advisors: They ensure the company complies with all necessary laws and regulations, handling the legal paperwork.Accountants: They prepare, check, and present financial statements that reflect the company's financial health.Regulatory authorities: Organisations like the Financial Conduct Authority (FCA) in the UK review the company's documents to protect investors and enhance public information.Investors: Individuals and companies that purchase shares, providing the company with the capital it needs to expand. The success of floating on the stock market will depend on investors' decisions to buy shares based on the company's potential and the owner's willingness to accept increased scrutiny.
Try the public limited company quiz
Final check:
What is meant by 'floating on the stock exchange' for a public limited company (PLC)?
'Floating on the stock exchange' refers to the process of a PLC selling its shares to the public on the stock market.
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