Private and Public Limited Companies

Private and Public Limited Companies

NCFE Level 1/2 Award in Business and Enterprise

Private Limited Company (LTD)

Private Limited Companies are very different from partnerships and sole traders

They have the following features:

* A company owned by at least 2 shareholders

* Shares are sold privately to friends and family who invest money into the business. They receive DIVIDENDS in return

* Shareholders have LIMITED LIABILITY

* Shareholders vote for a board of directors, who run the business

* The company must have the word “limited” or the letters “LTD” in it’s name 

Public Limited Company (PLC)

Public Limited Companies are the biggest type of private businesses in the UK. They have the following features:

* Shares are sold on the London Stock Exchange

* Shareholders have LIMITED LIABILITY

* Shareholders vote for a board of directors, who run the business

* The company must have the words “public limited company” or the letters “PLC” in it’s name

* Accounts must be published, and made available to anyone who wants to see them

Multiple Choice

Which of the following is a disadvantage of being a public limited company?

• The business is at risk of takeover

• Large sums of money can be raised

• Unlimited liability

• Limited liability

Multiple Choice

What are the owners of private and public limited companies called?

• Stakeholders

• Managers

• Board of directors

• Shareholders

Multiple Choice

Private and Public Limited companies both have

• Unlimited Libaility
• Limited libaility

Multiple Choice

Which of the following is an advantage of a private limited comapany

• You can sell shares openly to anybody around the world
• You can gain more sales as the business is well known
• You can choose your own shareholders that are suitable for the business
• They have unlimited liability

Multiple Choice

Why does a company issue shares?

• To raise money that can be invested in the business
• To make more profit
• To get more owners
• To allow the business to be sold off

Multiple Choice

What is one disadvantage of a public limited company?

• Stock market vulnerabilty

• Limited liabilities.

• They cannot buy cars.

• They cannot buy shares.

Multiple Choice

What is one advantage of a public limited company?

• They get free food.

• They can tell private limited companies what to do.

• They can buy an unlimited amount of vehicles.

• Shares are easily transferable.

Multiple Choice

What are some documents required for the formation of a public limited company?

• Article and memorandum of association.

• A car.

• An already established business.

• A private jet.

Multiple Choice

What is the simple difference between a public and private limited company?

• A public limited company is public and a private limited company is private.

• There are no differences.

• The public limited company can quote shares in a stock exchange while a private limited company cannot.

• One does not deal with shares while the other does.

Open Ended

Examination Question One

In a Limited Company who gets a share of the Profits (1)

Open Ended

Exam Question Two

Describe TWO features of a Private Limited Company (LTD) (4)