What are the public limited company disadvantages?

Going Public - Disadvantages

Profit-sharingIf the firm is sitting on a highly successful venture, future success (and profit) has to be shared with outsiders. After the typical IPO, about 40% of the company remains with insiders, but this can vary from 1% to 88%, with 20% to 60% being comfortably normal.

Loss of ConfidentialityA major reason why firms resist going public is the loss of confidentiality in company operations and policies. For example, a company could be destroyed if the company were to disclose its technology or profitability to its competitors.

Reporting and Fiduciary ResponsibilitiesPublic companies must continuously file reports with the SEC and the exchange they list on. They must comply with certain state securities laws ("blue sky"), NASD and exchange guidelines. This disclosure costs money and provides information to competitors.

Loss of ControlOutsiders are often in a position to take control of corporate management and might even fire the entrepreneur/company founder. While there are effective anti-takeover measures, investors are not willing to pay a high price for a company in which poor management could not be replaced.

IPO ExpensesAn IPO is a costly undertaking. A typical firm may spend about 15-25% of the money raised on direct expenses. Even more resources are spent indirectly (management time, disruption of business).

Immediate Cash-out Usually Not PermittedTypically, IPO entrepreneurs face various restrictions that do not permit them to cash out for many months after the IPO.

LiabilityThe company, its management, and other participants may be subject to liability for false or misleading statements and omissions in the registration documents or in the reports filed by the company after it becomes public. In addition management may be subject to law suits by the stockholders for breaches of fiduciary duty, self dealing and other claims, whether or not true.---------------------------------------------

What Is the Meaning of Public Limited Company?

A public limited company is one whose shares are traded at stock exchanges for the general

public. The liability of company is limited. The creditors can only claim the assets of the company and not those of the shareholders. There are governing and regulatory bodies controlling the conduct of these public limited companies

Significance

These companies are required by law to furnish true financial statements to the public. On the basis of these, the public can decide whether to invest their

money into the company. The company's stock prices are the main determinants of the profitability of the company.

Features

A public limited company requires at least two persons to be set up. The company has to be registered and must suffix its name with the words "Public Limited Company" or the abbreviated form as "PLC."

The company has a separate legal entity different from that of its shareholders.

Function

Once the PLC is formed, the company can issue shares to the general

public to gather funds for its operations. There are two main classes of

shares--common shares and preference shares. Common shareholders

are the main owners of the business as they have voting rights in the

company. Preference shareholders get priority over common

shareholders for payments. Preference shares do not entail voting

rights.

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Advantages & Disadvantages of a PLC

PLC, or Public Limited Company, is the legal designation of a company in the U.K. that gives or sells shares of the company to anyone who wishes to buy them and has limited legal liability. The London Stock Exchange only admits PLCs onto its list, and only if they follow a strict regulatory process. The advantages and disadvantages of a PLC should be weighed before entering into such a business venture

Requirements

Public Limited Companies are subject to specific requirements. Two or more people are required to form a PLC. Also, the company must be registered as a PLC to be able add "PLC" to its name. Each PLC must have at least 50,000

pounds of authorized share capital. Furthermore, the company must have a trading certificate from Companies House, an agency that assists with the incorporation and dissolution of limited companies.

Advantages: More Capital and Better Brand Recognition

Registering a company as a Public Limited Company has many financial and legal advantages. PLCs are able to sell shares of their company, which makes it is easier for them to gain large amounts of capital. PLCs are also generally in the public eye, increasing brand and company awareness.

Advantages: Access to Financing and Limited Liability

PLCs are able to get financing from banks easier because their size instills confidence in lenders that their investment will be returned. Limited liability means that legal actions are taken against, or on behalf of, the entity rather than the individual shareholders. This offers much welcome personal legal protection.

Disadvantages: Takeovers and Lack of Owner Control

One of the disadvantages of a PLC is that shares can be bought by other companies, which leaves the PLC open to takeovers. In addition, owners of a PLC aren't the final decision makers. Because every decision affects the financial health of the company, large decisions are most often decided by a committee of shareholder representatives.

Disadvantages: Transparency and Expensive Process

Business results of a PLC are published for the public and auditors are free to examine the company's financials at any time. Also, the formation of a PLC is often a difficult and expensive process. Shares are bought and sold by the public sector, which requires that PLCS are heavily regulated.

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Advantages and Disadvantages of Partnership

In simple terms, a business partnership accounts for a relationship that exists between two or more individuals who undertake and carry on a business. Partners contribute funds, property, skills, and labor, and are expected to have an equal share in both the profits and losses made by the business. While partnerships are easy to establish, there are also many positive and negative aspects they involve later on. It is always recommended you learn the various advantages and disadvantages that the business of partnership entails. Hence, following are the essential points which talk about the pros and cons of partnerships. Check them out:

Advantages of Partnership

1.Simply put, more than one owner of a business introduces more money to help starting a business.

2.There is a combination of talents, skills, and experience with the involvement of new partners, which may help in increasing the profits and cost-effectiveness of the business.

3.A partnership brings about better administration and financial planning which is otherwise difficult in case of a single owner of the business.

4.It is easy to expand the business with new partners being involved, since there is no hassle of managing the entire business on one's own.

5.All partners have an equal say in the matters of financial management, which fosters them to work whole-heartedly for the betterment of their company.

6.Post the payment of super tax to the government, the profits made by the company are equally divided among the partners. It is then that they can pay tax to the government on the shares of profit they've received.

7.In case of a loss, partnership renders moral support, thus, enabling for an even more insightful point of view.

8.There is lesser room for rash decisions as the decision-making process is the field of performance for all partners.

Disadvantages of Partnership

1.Surprisingly, a partnership is not necessarily a legal entity, and is identified only for the purpose of tax law.

2.The existence of a partnership comes to an end with demise, incapacity, lack of funds, or even retirement of a partner. Moreover, dissolving a partnership is likely for partners in case of discontent.

3.There are many instances when one partner is over-ruled by another as every partner has an equal say in important decisions.

4.Even the simplest of arguments can, sometimes, turn into major disagreements between partners. As a result, all partners are bound by allegiance made by one, even if its disagreeable by all.

5.Even if one of the partners is responsible for loss, all the partners are collectively liable for the aftermaths of the company. Many a time, partners are asked to clear the debts from their personal assets in accordance with the decision made by all.

6.It is forbidden for a partner to transfer a share or segment of the company to outlanders without the approval of other partners, which may become inconvenient for that partner to resign from the company.

7.In case of unlimited liability partnership, partners could lose all of their personal assets in case of bankruptcy.

A partnership calls for endless compromises, and the attribute of shared control and regulation, which is accompanied while running a company, makes partnership all the more

challenging to keep up with. Thus, when forming a partnership, the most significant decision for any owner is the choice of partner. If you really need the person's skills and

money for the welfare of your company, it is essential to take into account the advantages and disadvantages of partnerships before you offer them to be a partner in your business.

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Partnerships Defined and ExplainedA partnership is an agreement between two or more people to finance and operate a business.

Partnerships, unlike sole proprietorships, are entities legally separate from the partners themselves. In a general partnership, however, profits and losses flow through to the partners’ tax returns.

Each general partner has equal responsibility and authority to run the business. Each partner should be involved in day-to-day operations of the business, and should make management decisions. Any partner may represent the business without the knowledge of the other partners—the actions of one partner can bind the entire partnership. If one partner signs a contract on behalf of the partnership, the general partnership and each partner are responsible for that contract. The shared ownership concept that characterizes a business partnership gives it certain distinct advantages and disadvantages.

Partnerships are relatively easy to establish; however time should be invested in developing the partnership agreement. In a partnership agreement, the following arrangements, among others, should be spelled out:

1. How the business will be financed.

2. Who will do what work.

3. What happens if a partner dies.

4. What happens if one or both partners want to dissolve the partnership.

It is strongly recommended that an impartial attorney be contacted to write the partnership agreement. Here's how to find the right attorney.

Business Partnership Advantages• Partnerships are relatively easy to establish.

• With more than one owner, the ability to raise funds may be increased, both because two or more partners may be able to contribute more funds and because their borrowing capacity may be greater.

• Prospective employees may be attracted to the business if given the incentive to become a partner.

• A partnership may benefit from the combination of complimentary skills of two or more people. There is a wider pool of knowledge, skills and contacts.

• Partnerships can be cost-effective as each partner specializes in certain aspects of their business.

• Partnerships provide moral support and will allow for more creative brainstorming.

Business Partnership Disadvantages• Business partners are jointly and individually liable for the actions of the other partners.

• Profits must be shared with others. You have to decide on how you value each other’s time and skills. What happens if one partner can put in less time due to personal circumstances?

• Since decisions are shared, disagreements can occur. A partnership is for the long term, and expectations and situations can change, which can lead to dramatic and traumatic split ups.

• The partnership may have a limited life; it may end upon the withdrawal or death of a partner.

• A partnership usually has limitations that keep it from becoming a large business.

• You have to consult your partner and negotiate more as you cannot make decisions by yourself. You therefore need to be more flexible.

• A major disadvantage of a partnership is unlimited liability. General partners are liable without limit for all debts contracted and errors made by the partnership. For example, if you own only 1 percent of the partnership and the business fails, you will be called upon to pay 1 percent of the bills and the other partners will be assessed their 99 percent. However, if your partners cannot pay, you may be called upon to pay all the debts even if you must sell off all your possessions to do so. This makes partnerships too risky for most situations. The answer would be a different business structure.

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What is sole proprietorship? What are its advantages?

The most common and simplest form of business is a sole proprietorship. Many small businesses

operating in the United States are sole proprietorships. An individual proprietor owns and manages the

business and is responsible for all business transactions. The owner is also personally responsible for

all debts and liabilities incurred by the business. A sole proprietor can own the business for any

duration of time and sell it when he or she sees fit. As owner, a sole proprietor can even pass a

business down to his or her heirs.

In this type of business, there are no specific business taxes paid by the company. The owner pays

taxes on income from the business as part of his or her personal income tax payments.

Sole proprietors need to comply with licensing requirements in the states in which they're doing

business, as well as local regulations and zoning ordinances. The paperwork and formalities, however,

are substantially less than those of corporations, allowing sole proprietors to open a business quickly

and with relative ease — from a bureaucratic standpoint. It can also be less costly to start a business

as a sole proprietor, which is attractive to many new business owners who often find it difficult to

attract investors.

Advantages of a Sole Proprietorship

A sole proprietor has complete control and decision-making power over the business.

Sale or transfer can take place at the discretion of the sole proprietor.

No corporate tax payments.The most common and simplest form of business is a sole proprietorship. Many small businesses

operating in the United States are sole proprietorships. An individual proprietor owns and manages the

business and is responsible for all business transactions. The owner is also personally responsible for

all debts and liabilities incurred by the business. A sole proprietor can own the business for any

duration of time and sell it when he or she sees fit. As owner, a sole proprietor can even pass a

business down to his or her heirs.

In this type of business, there are no specific business taxes paid by the company. The owner pays

taxes on income from the business as part of his or her personal income tax payments.

Sole proprietors need to comply with licensing requirements in the states in which they're doing

business, as well as local regulations and zoning ordinances. The paperwork and formalities, however,

are substantially less than those of corporations, allowing sole proprietors to open a business quickly

and with relative ease — from a bureaucratic standpoint. It can also be less costly to start a business

as a sole proprietor, which is attractive to many new business owners who often find it difficult to

attract investors.

Advantages of a Sole Proprietorship

A sole proprietor has complete control and decision-making power over the business.

Sale or transfer can take place at the discretion of the sole proprietor.

No corporate tax payments.

Minimal legal costs to forming a sole proprietorship.

Few formal business requirements. \

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Sole ProprietorshipDefinition: A business that legally has no separate existence from its owner. Income and losses are taxed on the individual's personal income tax return.Tweet

The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. It simply refers to a person who owns the business and is personally responsible for its debts. A sole proprietorship can operate under the name of its owner or it can do business under a fictitious name, such as Nancy's Nail Salon. The fictitious name is simply a trade name--it does not create a legal entity separate from the sole proprietor owner.

The sole proprietorship is a popular business form due to its simplicity, ease of setup, and nominal cost. A sole proprietor need only register his or her name and secure local licenses, and the sole proprietor is ready for business. A distinct disadvantage, however, is that the owner of a sole proprietorship remains personally liable for all the business's debts. So, if a sole proprietor business runs into financial trouble, creditors can bring lawsuits against the business owner. If such suits are successful, the owner will have to pay the business debts with his or her own money.

The owner of a sole proprietorship typically signs contracts in his or her own name, because the sole proprietorship has no separate identity under the law. The sole proprietor owner will typically have customers write checks in the owner's name, even if the business uses a fictitious name. Sole proprietor owners can, and often do, commingle personal and business property and funds, something that partnerships, LLCs and corporations cannot do. Sole proprietorships often have their bank accounts in the name of the owner. Sole proprietors need not observe formalities such as

voting and meetings associated with the more complex business forms. Sole proprietorships can bring lawsuits (and can be sued) using the name of the sole proprietor owner. Many businesses begin as sole proprietorships and graduate to more complex business forms as the business develops.

Because a sole proprietorship is indistinguishable from its owner, sole proprietorship taxation is quite simple. The income earned by a sole proprietorship is income earned by its owner. A sole proprietor reports the sole proprietorship income and/or losses and expenses by filling out and filing a Schedule C, along with the standard Form 1040. Your profits and losses are first recorded on a tax form called Schedule C, which is filed along with your 1040. Then the "bottom-line amount" from Schedule C is transferred to your personal tax return. This aspect is attractive because business losses you suffer may offset income earned from other sources.

As a sole proprietor, you must also file a Schedule SE with Form 1040. You use Schedule SE to calculate how much self-employment tax you owe. You need not pay unemployment tax on yourself, although you must pay unemployment tax on any employees of the business. Of course, you won't enjoy unemployment benefits should the business suffer.

Sole proprietors are personally liable for all debts of a sole proprietorship business. Let's examine this more closely because the potential liability can be alarming. Assume that a sole proprietor borrows money to operate but the business loses its major customer, goes out of business, and is unable to repay the loan. The sole proprietor is liable for the amount of the loan, which can potentially consume all her personal assets.

Imagine an even worse scenario: The sole proprietor (or even one her employees) is involved in a business-related accident in which someone is injured or killed. The resulting negligence case can be brought against the sole proprietor owner and against her personal assets, such as her bank account, her retirement accounts, and even her home.

Consider the preceding paragraphs carefully before selecting a sole proprietorship as your business form. Accidents do happen, and businesses go out of business all the time. Any sole proprietorship that suffers such an unfortunate circumstance is likely to quickly become a nightmare for its owner.

If a sole proprietor is wronged by another party, he can bring a lawsuit in his own name. Conversely, if a corporation or LLC is wronged by another party, the entity must bring its claim under the name of the company.

The advantages of a sole proprietorship include:

Owners can establish a sole proprietorship instantly, easily and inexpensively. Sole proprietorships carry little, if any, ongoing formalities. A sole proprietor need not pay unemployment tax on himself or herself (although he or she

must pay unemployment tax on employees). Owners may freely mix business or personal assets.

The disadvantages of a sole proprietorship include:

Owners are subject to unlimited personal liability for the debts, losses and liabilities of the business.

Owners cannot raise capital by selling an interest in the business.

Sole proprietorships rarely survive the death or incapacity of their owners and so do not retain value.

One of the great features of a sole proprietorship is the simplicity of formation. Little more than buying and selling goods or services is needed. In fact, no formal filing or event is required to form a sole proprietorship; it is a status that arises automatically from one's business activity.

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What is a Sole trader or Sole Proprietor form of business?The sole trader is the oldest and most popular type of business. It is a form of business where there is only one owner who manages and controls the business.

A sole proprietorship, is a type of business entity which legally has no separate existence from its owner. Hence, the limitations of liability enjoyed by a corporation and limited liability partnerships do not apply to sole proprietors. All debts of the business are debts of the owner. It is a "sole" proprietor in the sense that the owner has no partners.

A sole proprietorship essentially means a person does business in his or her own name and there is only one owner. A sole proprietorship is not a corporation; it does not pay corporate taxes, but rather the person who organized the business pays personal income taxes on the profits made, making accounting much simpler. A sole proprietorship need not worry about double taxation like a corporate entity would have to.

A sole proprietor may do business with a trade name other than his or her legal name. In some jurisdictions, for example the United States, the sole proprietor is required to register the trade name or "Doing Business As" with a government agency. This also allows the proprietor to open a business account with banking institutions.

Advantages to a Sole Proprietor

An entrepreneur may opt for the sole proprietorship legal structure because no additional work must be

done to start the business. In most cases, there are no legal formalities to forming or dissolving a

business.

A sole proprietor is not separate from the individual; what the business makes, so does the individual. At

the same time, all of the individual's non-protected assets (e.g homestead or qualified retirement

accounts) are at risk. There is not necessarily better control or business administration possible with a

sole proprietorship, only increased risks. For example, a single member corporation or limited company

still only has one owner, who can make decisions quickly without having to consult others, but has the

advantage of limited liability.

Furthermore, in most jurisdictions, a sole proprietorship files simpler tax returns to report its business

activity. Typically a sole proprietorship reports its income and deductions on the individual's personal tax

return. In comparison, an identical small business operating as a corporation or partnership would be

required to prepare and submit a separate tax return.

A sole proprietorship often has the advantage of the least government regulation.

Disadvantages to a Sole Proprietor

A business organized as a sole trader will likely have a hard time raising capital since shares of the

business cannot be sold, and there is a smaller sense of legitimacy relative to a business organized as a

corporation or limited liability company.

It can also sometimes be more difficult to raise bank finance, as sole proprietorships cannot grant a

floating charge which in many jurisdictions is required for bank financing.

Hiring employees may also be difficult.

This form of business will have unlimited liability, so that if the business is sued, the proprietor is

personally liable.

The life span of the business is also uncertain. As soon as the owner decides not to have the business

anymore, or the owner dies, the business ceases to exist.

In countries without universal health care, such as the United States, a sole proprietor is also responsible

for his or her own health insurance, and may find difficulty finding any if one of the family members to be

covered has a previous health issue.

Another disadvantage of a sole proprietorship is that as a business becomes successful, the risks

accompanying the business tend to grow. To minimize those risks, a sole proprietor has the option of

forming a corporation. In the United States, a sole proprietor could also form a limited liability company, or

LLC, which would give the protection of limited liability but would still be treated as a sole proprietorship

for income tax purposes.