(a) Highlight any four differences between public limited liability company and a private limited liability company. (8 marks)
(b) Explain any four advantages a limited liability company. (2 marks)
Explanation
(a)(i) Public limited company can be formed by a minimum of seven members with no maximum while a private limited company can be formed by a minimum of two members and a maximum of fifty members.
(ii) Public limited company publishes its accounts to the public while a private limited company is not obliged to do so.
(iii) Shareholders can freely transfer their shares in public limited company while shareholders cannot freely transfer their shares without the consent of other shareholders in a private limited company.
(iv) Public limited company can obtain loans more easily from financial institutions than private limited company.
(v) Members of the public can be invited to subscribe to shares in a public limited company while members of the public cannot be invited to subscribe to shares in a private limited company.
(b)(i) Limited liability: The maximum loss of a shareholder cannot exceed his contribution to the share capital.
(ii) Greater degree of continuity: Death or withdrawal of a shareholder does not affect the existence of the business.
(iii) Greater access to capital: A limited liability company can easily access more capital through loans, issuance and sale of shares.
(iv) Ownership is separated from control: It is owned by shareholders but controlled and managed by board of directors.
(v) Usually large size and employs more people.
(vi) It is a legal entity: It can sue and be sued in its own name.
(vii) Experts can be employed to manage the business. The best hands can be employed as a result of its huge resources.