Ltd Stock
Some Major Difference Between Public and Private Ltd Chartered Accountant Firm by kavita.brijwal
Public Limited companies: Public stock means a company has basically sold a portion of itself to the public by offering shares in the business. In becoming “public”, these companies are obligated to the rules of the SEC and have to report all financial information on a regular basis. You have the opportunity to study the company, market conditions, PE etc in hopes that if you invest, your share price will go the right direction. You can also buy and sell at market value through a broker.
The main advantage:
Increased liquidity of the ownership shares of the company.
Higher share price and thus higher company valuation.
Greater access to the capital markets through the possibility of future stock offerings.
The ability of the company to make acquisitions of other companies using the company’s stock.
The ability to use stock incentive plans to attract and retain key employees.
Disadvantages of public Limited companies:
Time & Expenses, Public Disclosure
Control issues
Reporting Responsibilities
Private limited company: A Company incorporates with more than two people and it is limited to fifty members. In this case it is only a huge partnership and the liability is unlimited. A privately held company is one whose shares are held by one shareholder who is the owner of a company or a small group of shareholders. It is able to raise funds through the sale of its securities. This is the reason why public corporations are so important: prior to their existence, it was very difficult to obtain large amounts of capital for private enterprises. In addition to being able to easily raise capital, public companies may issue their securities as compensation for those that provide services to the company, such as their directors, officers, and employees.
Advantages. It has no requirement to publicly disclose much, if any financial information; such information could be useful to competitors. For example, required by the SEC each year that is a comprehensive summary of a company’s performance. Private companies do not file form 10-Ks. It is less pressured to “make the numbers”-to meet quarterly projections for sales and profits, and thus in theory able to make decisions that are best in the long-run.
Disadvantages continued:
Loss of overall ownership and control of the decisions, due to bureaucracy, take longer and there may be disagreements.
Significant expenses are incurred when setting up a company
More people to share profits with less income
Financial affairs must be disclosed publicly this information could be used to competitor
