Advantages and disadvantages of setting up a plc

Setting up a public limited company isn’t a step to be taken lightly, but for some businesses, it makes sound sense. Let’s take a look at some of the advantages and disadvantages associated with a plc.

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If you’re unsure what a plc is, and how it differs from a private limited company, there’s a good briefing from Bizfluent here – https://bizfluent.com/about-5514187-definition-public-limited-companies.html.

1. You can raise capital to fund growth

In a plc, the public buys shares in the company. That differs from a private limited company where you have control over who has shares, and what percentage of the company is owned by you and others. When the public buys stock in your company, they effectively raise very cheap capital for the company, to fund future growth.

2. You can remain in control – if you’re careful

With a plc, you still remain in charge, if you retain enough shares because no single shareholder will be able to exert control. Whereas with venture capital, or an “angel” investor, you may find that you no longer have complete control over the business.

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3. Personal liability is reduced

With a plc, any liability, as a result of legal action or a commercial dispute, will fall on the whole company. The share price may drop to reflect any problems, but that’s because the whole company will contribute to any settlement. With a private company, a small pool of directors will personally share the cost of any legal problems.

4. Reporting and governance are more stringent with a plc

For a start, you’ll need a qualified person to act as company secretary, and take responsibility for ensuring that the company complies with all of its financial and reporting obligations.

5. Boardroom politics can have major repercussions

Even though you have kept a large tranche of your company’s shares, other major shareholders could band together in opposition to you. In extreme cases, they could oust you from the board of your own company. Cheltenham accountants such as www.randall-payne.co.uk can help you to structure the plc so that the chances of this happening are greatly reduced.

For companies that have ambitious growth plans, or have already outgrown the private limited company structure, becoming a plc offers almost unlimited opportunities. Just bear in mind that it’s important to get the initial structure right.

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