Whether you are in the process of launching a startup or have created a highly profitable business we know that distinguishing between what is a private limited company and a public limited company can be a challenge. To remove the confusion we have created this short article to explain the difference between the two.
Public limited company vs private limited company
A private limited company (LTD) is owned privately, usually by its founders, a management team, and/or private investors. It can offer shares to attract investors, borrow money from banks or venture capitalists, or use its profits to fund growth. When it comes to transferring shares, however, the company’s Articles of Association will strictly control the process. In practice, the directors own the majority share of a private company and therefore retain control in terms of running the business.
It is a common myth that all private companies are small. IKEA, one of the world’s most successful brands with revenue for 2020 reaching $36.9 billion has never publicly traded on the stock exchange. Instead, in 1982 IKEA’s founder Ingvar Kamprad created a charitable foundation which owns the majority of the company.
A public limited company (PLC) can be registered on the London Stock Exchange where members of the public can buy shares. These shareholders, who normally have no connection to the founders/directors of the business become part owners of the company and have a say in how the organisation is run. The main advantage of ‘floating’ a company on the stock exchange is it allows the business to access large amounts of capital from selling shares.
Wrapping up
There are pros and cons related to choosing a private limited company or a public limited company legal structure. To find out if becoming a public company is the right move for your organisation, speak to an experienced Company Law Solicitor who can advise you on the risks and opportunities.
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