14.11.13
Limited company is divided into a private limited company and a public limited company. These companies are having limited liability due to have separate legal identity. Sole trader and partnership have unlimited liability. Private limited company and public limited company both sell shares to people.
Private limited company sells shares to
families, friends and relatives. In UK private limited company is abbreviated
as ltd. or limited. For an example Virgin Air ltd. means that this company is
formed as private limited company. Some advantages of this company are shareholders
who have limited liability, the business has ability to expand its business due
to additional capital from selling shares and the business can hire expert
people to improve business’ performances also.
Private limited company has some drawbacks that
are shareholders need to get agreement from other shareholders if they want to
sell their shares, business needs to fulfil many legal requirement needed, business
might face disagreement among shareholders and business’ profits are
distributed among shareholders.
Public limited company is business when it sells
shares to general public by listing in National Stock Exchange. In UK its
abbreviation is plc. There are some advantages from this business such as shareholders
that have limited liability, additional capital to expand the business,
shareholders can easily sell their shares to public and more transparency needs
to maintain shares price. Shareholders get dividend-right and opportunity to gain
for selling price shares.
Public limited company also has some drawbacks such as shares’ price is sensitive to external issue rather than company’s performance, less secrecy due to company must report to general public for its financial statement, otherwise shareholders may lose their money of share price fluctuation.
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