Business Ownership: Companies (Cambridge International A-Level Business)
Private limited companies
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Private limited companies are owned by one or more shareholders
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The business name is suffixed with 'Limited' or 'Ltd' in the UK and and S.A. in Spain
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Shareholders are often family members or close friends
- Private limited companies can remain as family-owned businesses for many years, as shares are passed from generation to generation
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Shareholders are usually also directors who run the business on a day to day basis
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Examples of private limited companies
| Example | Description |
|---|---|
| Huawei Technologies Co. Ltd | - Chinese private tech giant making telecom equipment, smartphones, cloud services |
| The LEGO Group (Denmark) | - Family‑owned toy company making interlocking bricks and themed sets worldwide |
| Timpson Ltd (UK) | - A UK chain offering shoe repairs, key cutting, dry-cleaning and photo services - The company is known for recruiting and training ex-offenders |
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Private limited companies may be more suitable than sole trader or partnership ownership if setting up the business involves significant capital investment, or involves some risk
- The owners personal assets are protected **, as they have limited liability
- Most private limited companies are** owned and controlled by just one person (just like sole traders) who has made the decision to reduce their personal financial risks
Evaluating private limited companies
| Advantages | Disadvantages |
|---|---|
| - Shareholders benefit from limited liability for debts incurred by the company - Access to **greater finance **from investors and lenders who consider limited companies to be less risky - Ownership can be easily transferred by selling shares - Business continuity, as the business does not die with its original owner | - More expensive and time-consuming to set up,** as legal advice is often required - More complex operational rules than sole traders or partnerships - Annual financial reporting and auditing are required - Shareholders may have little control over the company, as the founder usually imposes their own agenda** |
Public limited companies
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When a business is growing rapidly, it may require a significant amount of capital to fund its expansion
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To secure this funding, it may choose to transition from a private limited company (Ltd) to a public limited company (Plc)
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Public limited companies are large businesses that sell shares publicly on the stock exchange (e.g. the London Stock Exchange)
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Public limited companies have the suffix 'PLC' in the UK, 'Inc' in the US and 'GmBH' in Germany
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They must publish detailed financial accounts each year
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They may have many thousands of individual shareholders
- Each ordinary share allows its owner a vote at the Annual General Meeting
- Shares are often held by finance companies in pension funds and investment products
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Examples of public limited companies
| Example | Description |
|---|---|
| Toyota Motor Corporation (Japan) | - Vehicle manufacturer, producing cars, hybrids and trucks worldwide |
| PepsiCo, Inc. (USA) | - Global food and drink company behind Lay’s crisps, Doritos snacks and Pepsi soft drinks |
| Deliveroo plc (UK) | - London’s largest tech listing of 2021, Deliveroo provides on-demand food and grocery delivery services |
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Selling shares on the stock exchange for the first time is called flotation or going public
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Flotation is a complex legal process that allows large amounts of share capital to be raised
- E.g. When Applied Nutrition Plc floated in late 2024, around £220 million was raised for the firm
Evaluating public limited companies
| Advantages | Disadvantages |
|---|---|
| - Significant amounts of capital can be raised - Risks are spread among a large group of shareholders - Company shares can be bought and sold easily on a public stock exchange - A board of directors, made up of individuals from outside of the company management and major shareholders, can bring in expertise/perspectives that can promote growth - PLCs have high visibility with customers, suppliers, and potential investors, which can help grow its customer base - As large businesses PLCs may be able to dominate the market and benefit from economies of scale | - PLCs must comply with complex legal and financial regulations such as - Completing regular financial reports - Maintaining accurate accounting records - Holding annual general meetings - Setting up a public limited company can be expensive - Fees for legal and accounting advice - Costs of the flotation such as producing a prospectus and public relations - The management team are likely to prioritise short-term financial performance (e.g. paying staff less) over long-term strategic planning (retaining talented staff) so as to maximise profits for shareholders - Hostile takeovers are a risk, as shares can be bought by rival businesses |
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