Public Company registration is a complex procedure as it requires proper documentation. Similarly he also has to shoulder the entire burden of loss. Financial affairs are made public. Differance between a Limited and a Business Name, Kenya. A limited company can be set up with a minimum of two shares holders and the limit of their liability is as per the value of shares they own. Disadvantages of a limited company. Like a sole trader, a partnership suffers from most of the incapacities and disabilities described above. These employees can be the directors of the company, the secretary as well as the staff including the receptionist! The company accounts will be public. Some disadvantages include complex accounts, public records and accountant fees. Limited Company Registration If the company goes into debts, they are not liable to pay to the lenders and creditors from their own personal finance. A limited company is responsible for its own liabilities and debts. There is a loss of control of the business. Complex administration: Compared to running a business as a sole trader the administrative affairs of a Limited company are more involved. Liability. After serving in the United Stated Marine Corps for several years, he received his doctorate in history from the University of Nebraska. This is the fifth type of business found in Kenya. There are some less favourable aspects associated with limited company formation, as one would expect from anything that provides so many benefits. Two categories of … Below are the main advantages and disadvantages of trading through a company compared to a partnership. The advantages of Public Limited Company might stimulate you to start one, but all that glitters is not gold. He may do whatever he deems to be fit. A company limited by guarantee is its own legal entity and therefore has permanent succession. Separate and Independent Legal Entity The public limited company is a separate legal entity, and each shareholder is a … Under certain circumstances, hostile investors might buy up a large amount of stock, giving them a strong voice on the board of directors. Going “public” means a certain lack of control by the founders of the firm. Once a firm goes public, the firm is open to public inspection. Related Party Transactions: Private limited companies enjoy more relaxations over compared to public limited companies in related party transactions as most of the deals in private limited company is within the close network of directors or promoters. The company continues irrespective of changes in named owners (shareholders). Sometimes, they might not be made at all. No shareholder is individually liable for the payment. 5. This means, in turn, that major decisions must go through the board, with debates and voting. Definition: A Public Limited Company (PLC) is a separate legal business entity which offers its shares to be traded on the stock exchange for the general public. Shareholders are going to have a say in the direction the company takes. Let us discuss what disadvantages of Public Limited Companies the Zeus comes up with. Carbacid Investments. It guides a manager to be dynamic. EXPLAINED Decisions take longer and there may be disagreement. A Business name is a registration of a trade name for purposes of business whereas a Company of the incorporation of a separate legal entity to conduct business. • The shareholders in a private company do not have direct control over the business. Basic Materials. Most of the advantages and disadvantages of structuring your company as a privately held, limited liability company can be attributed to the company's status as a closely held company. The working of the Public Company is subject to more strict compliances of the provision of the Companies Act 2013. While owning a private limited company has several advantages, there are some disadvantages associated with it as well, such as the inability to publicly sell shares and limits on growth. Shares count for votes in PLCs, which means if you sell off more than 50% of your company, there is the potential for shareholders to take … Section 213 of the companies Act provides; Under Section 5 of the Companies Act 2015, a company is a company limited by shares if the Details of the company directors are also public, including their names and contact information. Forming the business is expensive and requires a lot of money before hand. Control. There are some important disadvantages of a public limited company, compared to a private limited company. This is not an incentive (necessarily) to rational management. Organization. The advantages include tax efficiency, separate entity and professional status. For  e.g. A company limited by guarantee is its own legal entity and therefore has permanent succession. Since the law does not distinguish between the owner and his business, his liability is unlimited. A Public Limited Company (PLC) means, first, that the firm is parceled out into shares and sold “publicly” on any or all the globe's stock exchanges. Since the company is now “public,” anyone can buy up shares, and there is no limit as to how many shares one can buy. ... A limited company like a natural person has characteristics other than its name. Shareholders may have other plans to maximise profits over social and ethical goals. 1. The following are advantages and disadvantage of trading through a company compared to trading through a sole proprietorship business. Unlike a conventional limited liability company, the authorized capital of a PLC is divided into shares that can be traded on the stock exchange. Because public stock has a value associated with it, often higher than shares that are privately held and traded, they can be used to purchase additional assets that your company may want or need. Public limited company is the large scale business that consists of 3 directors and 7 shareholders. Recognizing 7 shareholders and 3 directors; For Public Limited Company … 30) of the Laws of Kenya, limited partnerships must be registered with the Registrar of Companies. The financial books and records of the firm are open to anyone, allowing the competition to see precisely how much profit or loss the firm is experiencing. Often, the costs of setting up a public firm and Initial Public Offering (IPO) can run into hundreds of thousands of dollars. However, the directors are responsible for the way the company is run. A company at its crux, is an artificial person created by law. There is delayed decision making due to bureaucracy. The chairman and board of managers are appointed by the government. In this case, a firm that was built up by one group (or person) can now be taken over by others since the firm has gone public. Decisions on the way the company is run is done in meeting by the board and bound by resolutions. International Companies in Kenya. Agriculture is a major employer; the country traditionally exports tea and coffee and has more recently begun to export fresh flowers to Europe. List of the Advantages of Limited Liability Companies 1. (For purposes of this explanation a Business Name refers to both a Sole proprietorship & Partnership) Its capital and largest city is Nairobi.The capital, Nairobi, is a regional commercial hub.The economy of Kenya is the largest by GDP in East and Central Africa. ADVERTISEMENTS: Advantages of PLC: PLC is a valuable concept in marketing. Contact Biz Brokers Kenya for all your Business registration and start up consultations all over Kenya. If the company is public, it must have a board of directors representing the main and most powerful stockholders. There is a loss of overall ownership. Tax benefits of a limited company. Public Limited Companies have several advantages and disadvantages; Advantages. Type of companies under the Kenyan Companies Act 2015. While most companies limited by shares are set up as private companies, in this article we look at the advantages and disadvantages of a public limited company. Home | About us | Our Services | Business Opportunities | Business for Sale | Trade Mark | Company Registration | Add Link | Business Name Registration | Download Registration Forms | Contact Us | Reference | Links | Privacy | Registration FAQ's | Terms & Conditions |. • A private company can commence trading immediately it is corporatedunlike a public company. Such a person is legally liable for all the losses and profits in the business. Advantages vs. Focused on economic topics, Johnson reads Russian and has published in journals such as “The Salisbury Review,” "The Constantian" and “The Social Justice Review.". 43- A. Flexibility of operations is re­duced. Therefore, ownership can be separated from control. SOLE PROPRIETORSHIP / BUSINESS NAME Secondly, it means that those who invest in the firm are protected from extreme loss if the company fails. The concept emphasizes on competitive dynamics. Registration A BN is generally simpler to register and costs less and can have one person as a proprietor or two or more as partners, whereas a Limited company has a minimum of two shareholders, but can appoint directors and managers to operate the company. Reach out to Access Bank customer care service using these contacts. Can raise more capital when compared to private limited companies; Have limited liability which means they cannot lose private assets in settlement of company debts. Disadvantages of Going Public . Business Name Registration. It is not often many shareholders see it this way. Continuity. If the business falters, is personally liable as he and the business are one and the same item.. On the bright side, he has complete control over his business and does not have to share his profits with any body. The Initial Public Offering (IPO) Process. One requirement under the Companies Act that when the membership of a private company exceeds fifty, it must convert to a public company.The right to transfer shares is restricted and shares or debentures cannot be subscribed to the public. As a sole trader business your only obligation is to produce a set of sole trader accounts and file … He will not be able to defend himself by saying that the act was committed by  his business and not by him. Disadvantage 2 of a Limited Company: Administration Costs
Accounting costs for a limited company tend to be more expensive (and complicated) than for a Sole Trader.
After a certain level of total revenue, limited companies are required to have their annual accounts audited (which can be expensive). For unlimited companies there is no limitation on the liability of members to pay the debts of the company and the members are ... Companies Limited by shares. Disadvantages of Going Public . ADVANTAGES OR DISADVANTAGES OF LIMITED OVER A BUSINESS NAME. By registering your company as a company limited by guarantee, it guarantees business continuity (unlike a in the case of Sole Proprietorship). LastBull.com: Advantages and Disadvantages of IPO/Public Limited Companies, MPartners, Inc. A sole entity might come to an end if the owner becomes bankrupt or has an untimely demise, with no one to look after the business. i.e. Its an association of individuals having a separate legal existence, perpetual succession and a common seal. Companies Limited by shares. The sole trader is also liable to pay for any legal compensation that might arise in the course of running the business. The advantages of Public Limited Company might stimulate you to start one, but all that glitters is not gold. What is the differences between Limited Company, sole proprietorship and Partnership? A Limited Company is legally a separate Business entity. A limited company is a separate entity and is a separate person in the eyes of the law. In reality, this entails that decisions will be slow and often painful. International companies are important in the economic and developmental stability of Kenya. A company has a perpetual existence, which is not affected by the death of any shareholder or director. However, most of these perceived disadvantages pale in comparison to the tax advantages, enhanced professional image, and limited liability protection you will enjoy. -2.75% +6.25% 2.16. Open Public Limited Company is a form of joint-stock company. Disadvantages of being a Public Limited Company. Business . Limited liability: The liability of a public company is limited. • A private company must submit annual returns on prescribed forms to the registrar of the companies immediately after the annual general meeting. The sole trader has the final say as far as decision-making is concerned. In a partnership, the proprietor /s have full control of the affairs of the BN, in a Company control is via board decisions or as per share holdings held by the shareholders. These employees are responsible for running of the company. Its capital and largest city is Nairobi.The capital, Nairobi, is a regional commercial hub.The economy of Kenya is the largest by GDP in East and Central Africa. Forming the business is complex as there are a lot of legal formalities that have to be adhered to. As with any type of business whether a limited company, OPC, private or public company, they all come with their own unique advantages and disadvantages. These are Public companies limited by shares and Private companies limited by shares. In the case of a company limited by shares a member will be liable only for the amount payable on his shares if the company is limited by guarantee, then the liability is limited to the amount quarantined to be paid. Section 43-A sub-section (1) provides that a private company would be deemed to be a public company where twenty-five percent or more of its paid-up share capital (whether preference or equity) is held by one or more public companies or private companies which had become public companies by virtue of Sec. This is also known as a divorce of control. The shares cannot be issued to the general public unless it is a public limited company. Its capital is generally divided into transferable shares, subject to certain conditions. There are more statutory regulations to conform. Distribution of powers; The shares of a public limited company can be bought by anyone, thereby increasing the number of members. Members: In order for a company to be public , it should have a minimum of 7 members (maximum unlimited). Companies must also adhere to different reporting and filing requirement according to the Companies Act of 2006. Generally referred to as a legal being where the directors and the shareholders have limited liability in the business. By registering your company as a company limited by guarantee, it guarantees business continuity (unlike a in the case of Sole Proprietorship). More than 2.5 million companies across the United States are now taking advantage of the LLC structure to create jobs and market opportunities. A complete breakdown of limited company advantages and disadvantages. What are the disadvantages of a public limited company? There is excessive Government control over public companies. More abstractly, “limited” means that only the existing assets of the firm can be seized for the payment of debt. LIMITED COMPANY If the company is public, it must have a board of directors representing the main and most powerful stockholders. Advantages vs. Forming the business is complex as there are a lot of legal formalities that have to be adhered to. If the business goes bankrupt, the owner will have to cough money from his own assets  and financial reserves to pay to the creditors and lenders. Disadvantages. This distributes the powers to more and more people which may lead to arguments between the directors and the shareholders. Disadvantages of a Limited Company. A partnership is a Business Name Registered and run by two or more people together. A private limited liability company is only permitted to have a maximum of 50 members (excluding those under the company’s employment). A written agreement is at times necessary stating the terms and conditions of conducting the partnership business without harming the interest of either party. The laws of almost all the countries specify the use of the word ‘limited ‘ or ‘Ltd’ after the name of the company. The banker (or “underwriter”) then offers the initial shares to the public (and keeps a substantial commission). Differance Between a Limited company and a Business name. The company is generally is held separately for any wrongdoing, the case will be filed against the company and not the directors. Forming the business is expensive and requires a lot of money before hand. The Limited Liability Partnership combines some of the features of a traditional partnership, in particular flexibility, with the limited liability benefits more typically associated with a company. Below are some important advantages of having this type of public company. Many professionals are now forming LLPs, because they are protected to some degree from being involved in a malpractice suit against another partner. Disadvantages of a Limited Company. And to invest in Public Limited Company you must be ready for some obstacles too. Limited company formation. A PLC is normally a complex thing to start. Company Formations » Public Limited Company : Public Limited Company: A public limited company is a company that has permission to offer its registered securities for sale to the general public, typically through a stock exchange, or occasionally a company whose stock is traded over the counter (OTC) via market makers who use non-exchange quotation services. The partners in a partnership just lime in a sole proprietorship are personally liable for acts of the partnership LLCs are currently classified as a pass-through entity. The people to whom the shares are issued are termed as shareholders. More regulation. And to invest in Public Limited Company you must be ready for some obstacles too. A company is said to be limited by shares if the liability of its members is limited by the memorandum to the amount if any, unpaid on the shares respectively held by them. One has to maintain a careful record if he is self-employed. Companies must submit their accounts to Companies House annually. Sole traders have more privacy than limited companies, which could be a problem for some. Immigration Permits When a limited company is incorporated, it is considered a separate individual by the law. Your limited company will be set up within a few short hours after your initial formation application. Kenya is a country in East Africa and a founding member of the East African Community (EAC). This means, in turn, that major decisions must go through the board, with debates and voting. Enjoy economies of scale. This is also known as a divorce of control. The Limited Liability Partnership combines some of the features of a traditional partnership, in particular flexibility, with the limited liability benefits more typically associated with a company. This is especially so in the government sector, which would pose a problem for companies seeking public tenders. If you want your shares listed, you need to meet strict discourse and filing requirements for the London Stock Exchange, and to keep up to date with such requirements on a regular basis. In BN's the proprietor is personally liable for act and omission of the registration. In comparison to a private limited company, it has more stringent regulatory requirements. • The shareholders in a private company do not have direct control over the business. The limited company business structure is the second most popular in the UK. Disadvantages. • A private company must submit annual returns on prescribed forms to the registrar of the companies immediately after the annual general meeting. Under a PLC, losses suffered by the investors will be limited to the amount that they have invested in the company. He is not legally bound to listen to anyone. Disadvantages of being a Public Limited Company. Copyright 2021 Leaf Group Ltd. / Leaf Group Media, All Rights Reserved. In the eyes of the law,  both the owner and his business are the same. Lack of motivation: There is divorce between ownership and management in a public company. Business compliance is our specialty, Business startup is our passion. The private limited firm can easily be initiated and documented with the collaboration of two members. Limited liability public company. For Public Limited Company registration, there is a basic requirement of a minimum of 3 directors & 7 shareholders. 5. ADVANTAGES OR DISADVANTAGES OF LIMITED OVER A BUSINESS NAME. The company has to disclose some corporate information on the public records. Employees can be made more loyal through share schemes. Sometimes, they might not be made at all. A company limited by guarantee requires all directors and members to undergo vetting before the company is Registered. Let us discuss what disadvantages of Public Limited Companies the Zeus comes up with. Differance between a Limited and a Business Name, Kenya. Regulation is far more stringent when you run your company as a PLC. A company limited by guarantee (CLG) is an alternative type of corporation used primarily for non-profit organisations that require legal personality. Upon death or exit of a proprietor the BN ceases to exist, whereas a company can live forever in perpetuity outliving the directors. The Proprietor / s are personally responsible for all the affairs pertaining to the business. The company has more borrowing capacity. – Disclosing company information on public record, including details of directors and shareholders. Advantages and disadvantages of setting up a limited company. The company continues irrespective of changes in named owners (shareholders). The company’s name must end with ‘Limited’ if it’s a public company and ‘Private Limited’ if its a private company. Disadvantages of a Public Limited Company Potential for Loss of Control : Ultimately, shares control company ownership . Limited Company Advantages and Disadvantages. They are responsible for the day to day management but are accountable to the government. Those who buy shares have no particular interest in the firm except in that it makes a quick buck. 7. For the acts and omissions unless where the court goes behind the company shawl. A sole proprietorship is generally a Business Name (BN) Registered, owned and headed by one individual only. The personal touch may be lost. The liability of the shareholders is limited to the amount paid by them during the purchase of the shares. The shares cannot be issued to the general public unless it is a public limited company. As stated by section 2(28) of the companies ordinance 1984 a private Limited company relates to a company which according to its Articles of Association: Public Limited Companies have several advantages and disadvantages; Advantages. The PLC concept advocates that marketer should be aware, alert, and conscious about market trends and accordingly […] Depending on the purchase, the entire acquisition could potentially be paid in stock if you so wished. A limited liability private company is owned by a few individuals and it is closed to the public. Companies are generally separate entities from the shareholders and hence separately liable. Advantages of a Limited Company 1. The public cannot buy shares in the company. Our all-inclusive package costs only £125 plus VAT and includes online registration, VAT & PAYE registration, share structure advice, free business banking, a 15% discount on Hiscox business insurance as well as a registered office address. The law does not make any distinction between the owner and his business. Financial affairs are made public. Most companies however, have an interest in laying out a long-term growth plan that takes patience and planning. Limited liability companies are structured similar to limited partnerships. In some cases, the firm can be controlled by a board of directors who do not necessarily have the time for hands-on business management. For e.g. There could be a possible loss of control, as people may find that shareholders own over 50% of the shares, entitling them to the ownership of the business. A public limited company can be listed on a securities or stock exchange or not. ADVERTISEMENTS: Advantages and Disadvantages of Public Corporations! The term “public” here is to be taken literally. In order to form a public company, there must be at least seven persons to sign the memorandum of Association. It helps managers design the relevant marketing strategies for each stages of the PLC. According to the regulations of the corporate law, a PLC has to compulsorily present its financial stats and position publicly to maintain transparency. As said earlier, the financial benefit in the form of raising capital is the most distinct advantage. The finance for starting a limited company is raised by issuing shares. 8. These are on public record so anyone can view them online. Enjoy economies of scale. Unlimited Companies. Shareholders may have other plans to maximise profits over social and ethical goals. You have less overall control of the company. To check whether the chosen name is available for adoption, the promoters have to write an application to the Registrar of Companies of the State. Public corporations, also called state-owned enterprises and nationalized industries, are owned by the government. Many professionals are now forming LLPs, because they are protected to some degree from being involved in a malpractice suit against another partner. If this is the case, then those who control the business do not own it, and do not see profit. Profits are shared either equally or as per the terms given in the written agreement. We are in the Business of Business. This is the most viable options if the capital is being invested into the business by anyone who does not wish to be involved in running it. (adsbygoogle = window.adsbygoogle || []).push({}); The most asked question we receive with regards to registration decisions is :- However, the latest legislation is a step in the right direction and Kenya has made great strides, coming from the 154th position in 2011. These public limited company disadvantages include: 1 More regulatory requirements To help protect shareholders, the legal and regulatory requirements for a public limited company are more onerous than for private limited companies. He keeps the entire profit earned by him. In reality, this entails that decisions will be slow and often painful. Since a limited company is a separate person, it can hire ‘employees’. (Private limited company advantages and disadvantages). Your Contractor Advice Line ... Companies House require certain company records and accounts from all limited companies, which become public record and can be accessed by anyone. ... in the case of a public company limited by shares, ... under the provisions of Limited Partnerships Act (Cap. A limited company is a very tax efficient businesses structure because limited companies pay corporation tax on their profits of a flat rate of 19%. • A private company can commence trading immediately it is corporatedunlike a public company. For the past two decades, international companies have greatly helped and partnered with local firms and organizations in addressing national challenges that are not limited to food security, health, hygiene, and water in marginalized areas. Alternatively, it can be also used for the expansion plans of the company. So the Question begs: Organization. A public limited company is a type of large business that has offered shares to the general public and has limited liability. A public company is required to observe several legal formalities. 30/10. These limited liability company advantages and disadvantages may help you be able to determine if an LLC structure is the right one for your business. There is continuity after the death of a member. When setting up a company, significant expenses are incurred. A Public Limited Company is a type of business entity which offers limited liability to its owners. Disadvantages. 30) of the Laws of Kenya, limited partnerships must be registered with the Registrar of Companies. The firm must hire an investment bank and a securities lawyer. This is called “limited liability.” This means that if one invests in a firm that fails, only that investment money can be claimed by the firm's creditors. Business Name Registration It is very much like any major entity in that it is very strictly regulated and such companies are required to publish their financial documents so that shareholders and general stakeholders can see what the financial health of the company … Its shares can be acquired by anyone, either privately, during an initial public offering, or through trading on the stock market. Theoretically at leas, a partnership is less stable than a private company. Disadvantages of a Public Limited Company. i.e. PARTNERSHIP / BUSINESS NAME Agriculture is a major employer; the country traditionally exports tea and coffee and has more recently begun to export fresh flowers to Europe. A private limited company hold high credibility in the national and international market. The person and his business are "one" legally. This distributes the powers to more and more people which may lead to arguments between the directors and the shareholders. Meanwhile many companies limited by shares are formed as private companies, you may get to know through this article about the advantages and disadvantages of a public limited company. Means that only the existing assets of the provision of the business shareholders... And cons anyone, either privately, during an initial public offering, or through on. Disclosing company information on the public and Independent legal entity a complete breakdown of limited advantages... 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Procedure as it requires proper documentation company do not own it, and do not have direct over... And members to undergo vetting before the company, the financial benefit in the written agreement is times! And nationalized industries, are owned by a few short hours after your initial formation application comparison to a company! Of setting up a limited company goes public, the directors, cases be... Include complex accounts, public records has to disclose some corporate information public! Stated Marine Corps for several years, he received his doctorate in history from the shareholders of 2006 that who. The same owners ( shareholders ) own it, and others his business and not by him against! Shareholders as dividend any distinction between the directors are also public, it has an Authorized share holding which the. Be the directors … advantages vs public companies limited by shares and private companies limited by requires. Marketing strategies for each stages of the company, it can hire ‘ employees ’ submit their to! This post, we look at some of these pros and cons employees be! Also known as a divorce of control by the government but all that glitters is not gold company a company!