Essay On Public Limited Company
A public limited company is one, which sells shares to the general public on the Stock Exchange. It has a separate legal existence as it can sue and be sued, own property in its own name and enter into contracts. The advantages of being a public limited company are it has limited liability. This means the owners and shareholders are limited to the amount of money they lose. They are only liable to lose the amount they put into the business. It can sell shares to the general public on the Stock Exchange. This means that there is more finance available to the business.
The business can also raise capital through venture capitalists, selling assets and large loans, for example. The employees can also specialise in specific areas of the business. They benefit from economies of scale because they buy in bulk. The disadvantages of being a public limited company are that it may be inefficient due to its size. The business is under the public eye that means it has to produce annul reports, which are seen by the public. It is difficult to set up, as it has to go to the registrar general to be issued with a certificate of incorporation to allow it to trade.
It is difficult to make decisions, as the shareholders have to be consulted. Communications are slow because of the size of the business. They are expensive. There could be disagreements between directors and shareholders. There may be takeover bids where another business buys all the shares in the business and the business has no choice over it. Examples of public limited companies are Marks and Spencer plc, British Airways plc and Aston Barclay plc. Co-operatives A co-operative is a business which main aim is for customer satisfaction, rather than to make a profit.
The advantages of being a co-operative are that anyone can join the co-operative just by buying shares. As many buy shares in the business there is capital available. The business can also specialise in a specific market which customer need support in. workers can also specialise. The disadvantages of being a Cooperative are that no matter how many shares are owned by one person, they only get one vote in meetings. The profits have to be shared between all shareholders and the business has wide aims as it tries to gain customer satisfaction. These aims can be difficult to meet.
Examples are retail outlets or services such as foster care. Franchises A franchise is the right given by a business to someone who has bought part of it to use its name when selling his or her product. A franchisee is the business, which buys the right to sell the other company’s product or service. The advantages of being a franchisee is that they have a recognised product, which almost guarantees immediate success. The franchisee gets support from the franchisor with problems such as quality control or tax problems. The franchisee gets a share of the profits, which he or she makes from the business.
There is also a reduced risk of failure as the product or service has been tried and branded a success already. The disadvantages of being a franchisee are that they do not have complete control. They cannot make decisions without the permission of the franchisor. Not all the profits are retained by the franchisee. A percentage of the profits must be given back to the franchisor. The franchisor can also end the franchise without giving a reason. A franchisor is the business, which sells its product or service to a franchisee in return of a share of the profits.
The advantages of being a franchisor are that the business can expand without having to pay out any money. They receive the money for the expansion. The franchisees are motivated to gain the largest profit possible, which means the franchisor has a greater payment in return. The franchisor still has some control over the franchisee because if the franchisor decides to sell the franchise, he or she can do so without a reason. The disadvantages of being a franchisor are they cannot have complete control as it is expanding externally. The franchisor does not retain all the profits for this reason. An example of franchise is McDonalds.
Sony Corporation is a public limited company. This means it sells shares to the general public on the Stock Exchange. It has a separate legal existence as it can sue and be sued. it has limited liability. This means that there is finance available to the business because it sells shares on the Stock Exchange. The business can also raise capital through venture capitalists, selling assets and large loans, for example. They benefit from economies of scale because they buy in bulk. It may be inefficient because of its size. It is difficult to make decisions, as the shareholders have to be consulted.
Communications are slow because of the size. The business is under the public eye that means it has to produce annul reports, which are seen by the public. Local, regional, national and international markets. Local markets are where a business is set up to receive custom from people living nearby. These are usually small business such as sole traders. Regional markets are where a business operates to targets consumers within a large area within a country such as a county. These businesses are usually relatively small but have more than one branch, such as a partnership.
National markets are those which are found throughout the country. These businesses are medium to large businesses such as limited company. International markets are ones, which are throughout a continent or the whole world. They are large businesses such as franchises. Sony Corporation is a business in the international market because there are offices throughout the world and their products are sold all over the world. Sony has offices all over Europe (UK, Austria and Germany for example), the USA, Japan, Asia-Pacific, Middle-East and Africa and Latin America. Change of ownership
Some businesses may decide to change ownership for one or more of the following reasons: * Limited liability- If the business has unlimited liability, the owner risks loosing personal possessions when in debt. The business may decide to change ownership to have limited liability so the owner(s) do not risk loosing personal possessions or assets. They will only be limited to the amount of shares they have in the business. The benefits of having limited liability are that the owner(s) is only liable to loose the amount they put into the business. They do not risk loosing personal possessions.
There are no disadvantages to limited liability. Assess to different sources of finance- Small businesses such as sole traders, are limited when choosing sources of finance. They can loan money from family or friends. They can apply for a grant from the government. They could get a loan from the bank or building society. It may also take out a mortgage. Larger businesses have wider sources of finance available. They can sell shares to family, friends and employees. If they are a public limited company, they can also sell shares on the stock market to the general public.
They may get a loan from banks and building societies as well as venture capitalists, such as HSBC. It could sell assets. For example, Kunick Ltd could sell Leisure Connections Ltd to another company. The advantages of having different sources of finance are that they have a wider choice. They can decide which suits the business best. They can also raise more money. The disadvantages of having different sources of finance are s Control- As a business grows, control is lost. If a business is a sole trader, there is only one owner, who has complete control.
If it grows to a partnership, the control is shared between up to twenty people. If a business becomes limited, the control is shared between all shareholders. In a franchise the control is shared between the franchisee, franchiser and shareholders. When a business takes out a loan from a bank for example, the bank will also be considered to own part of the business. So, as a business grows, control is lost. The advantage of being a small business is that the owner has more control. Larger businesses have a disadvantage of being so large control is lost.
