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Outline What Is Meant By Public Limited Company And Outline The Advantages…
Outline What Is Meant By Public Limited Company And Outline The Advantages And The Disadvantages Of A Public Limited Company (45 Marks):
Public Limited Company:
This is a company that has its shares quoted on the stock exchange. It must have a minimum of 7 shareholders e.g. AIB PLC.
Advantages:
Limited Liability:
Shareholders/owners are not personally liable for the debts of the business. They can only lose what they have invested.
Taxation:
The company pays the corporation tax rate of 12.5% on its profits. This is considerably lower than the rate paid by sole traders and partnerships.
Continuity of Existence:
Death of a major shareholder / managing director will not result in the termination of the business.
Access to Finance;
PLC’s can easily raise additional equity capital by selling shares. As PLC’s tend to have a better credit rating, they also find it easier to acquire loans from banks. Thus, expansion is much easier for PLC’s.
Disadvantages:
Legal Formalities:
Before trading, the business must receive a certificate of incorporation from the companies’ registration office (CRO). This requires the competition of a number of documents such as the memorandum of association and article of association.
Confidentiality:
Private limited companies must audit and publish their accounts. This gives stakeholders, such as employees, access to sensitive information that they can use to their advantage.
Costs:
Formation costs are quite high, as the company must produce a prospectus / hire solicitors and stockbrokers.
Takeover:
The share price of the PLC may fall, which makes the business vulnerable to a hostile takeover.
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