Limited Companies (Ltd & Plc) (Years 8–11) — Business Studies

How private (Ltd) and public (Plc) limited companies work, the role of shareholders, limited liability, and the differences between them.

A limited company is a business that has been turned into a separate legal person of its own. This process is called incorporation, and it gives the owners a powerful protection: limited liability.

Why this matters Once a business grows, unlimited liability becomes too risky. Becoming a limited company protects the owners' personal wealth and makes it easier to raise large amounts of money.

Incorporation and limited liability

When a business is incorporated, the law treats the company as separate from its owners. The owners are called shareholders because they own shares (small parts) of the company. Limited liability means that if the company fails, shareholders can lose only the money they invested in their shares. Their personal savings and home are safe.

Incorporation builds a legal wall between owner and company: shareholders can lose only what they invested, while their personal assets stay outside the business circle.

Private limited company (Ltd)

An Ltd is often a family or small business, such as a modest-clothing brand run by a family. Its shares are sold privately, usually to family and friends, and cannot be sold to the general public.

Advantages: limited liability, easier to raise capital than a sole trader, and control is kept within a small group.
Disadvantages: more paperwork and legal rules, some financial information must be filed, and shares cannot be sold freely.

Public limited company (Plc)

A Plc is a large company whose shares can be bought by anyone on a stock exchange. This lets it raise very large sums of money to expand.

Advantages: can raise huge amounts of capital, a well-known and trusted name, and easy for investors to buy and sell shares.
Disadvantages: expensive to set up, must publish full accounts, and the original owners can lose control if others buy enough shares. There is also a risk of takeover.

How Ltd differs from Plc

Feature	Ltd	Plc
Who can buy shares	Private (family, friends)	Anyone on the stock exchange
Size	Usually smaller	Usually very large
Accounts	Less information published	Full accounts published

Both share limited liability and are separate legal bodies, but a Plc trades its shares publicly while an Ltd keeps them private.

Put these steps in order for a private company (Ltd) converting into a public company (Plc):

Directors decide the company should "go public" to raise more capital
The company meets the legal requirements for a Plc, including minimum share capital
A prospectus is issued inviting the public to buy shares
Shares are floated (sold) on the stock exchange for the first time
Shares are then bought and sold freely by the public

Common exam mistake: saying limited liability means the company itself never has to pay its debts. It is the opposite — the company must pay in full; limited liability only caps how much the shareholders personally can lose.

Exam technique: when a case study describes a family business wanting to expand while "keeping control", recommend Ltd, not Plc — a Plc risks losing control to outside shareholders, which is exactly what the scenario is trying to avoid.