Businesses come in a variety of structures. Each structure has its own pros and cons. When choosing a business structure, entrepreneurs should study the business forms available in the area where the owner wants to start his or her business. In the United Kingdom, a common business structure is the Public Limited Company (PLC). PLCs may only be formed by two or more entrepreneurs.
Shareholders and Publicly Traded Stock
PLCs are a little like U.S. corporations in that PLCs have shares that determine a person’s ownership interest in the PLC. A person holding 60 percent of the PLCs shares owns 60 percent of the business. The PLC has shares that are publicly traded on the stock market. Other business forms, such as limited partnerships or sole traders do not have shares or are not publicly traded.
Limited Liability for Shareholders
Shareholders of PLCs are not personally liable for the debts of the company. Instead, the shareholder’s risk in investing in the PLC is only to the extent of the shareholder’s investment. Imagine that a PLC has one shareholder who invested $100,000 into the business. The business goes bankrupt and has debts reaching the millions. The shareholder would only be liable for the debt up to how much was invested in the business; the creditors cannot try to go after the shareholder’s personal assets.
PLCs may qualify for various tax advantages. According to businesswings.co.uk, high earners may be able to keep the money in the business as opposed to treating the money as income and paying taxes on it.
PLCs tend to be more costly to start than sole traders or partnerships. Further, because of the regulation surrounding PLCs from the government, owners must file annual accounts of the company and are subject to being audited; these procedures can get expensive.