The Public limited company is preferred as it has a separate legal entity under the Companies Act, 2013. Such form of business has a wider Compliance capacity to own property and incur debts. This is because the member of the company, both shareholders and the directors, have no liability to the creditors of the company.
Shares offered by a public limited company are easily transferable to any other person, such that it requires filing and signing of share transfer form to transfer the shares.
Disadvantages of the public limited
- Nepotism: Get ready to stand in long queues as a PUBLIC LIMITED COMPANY has to undergo too many legal formalities.
- Controls and regulations: Public Limited Companies has large compliance to be followed.
- Inflexibility: Thanks to its democracy and high degree of external control that we get another con. Rapid decisions could not be taken in a Public Limited Company, thus imparting rigidity in decision making to the company.
- Lack of secrecy: You will have to maintain transparency with public in your decisions. Thus even business secrets are not secrets.
- Distribution of profits: Public company has to distribute profit with shareholders.
- Suitability: Public Limited Company are not suitable for all types of business activities. Small scale businesses which cater to the needs of limited section of the society, need not be incorporated as Public Limited Company. It is best entity for large scale businesses only.
- High costs: All Public Limited Company provide does not come without any cost. Starting up a Public Limited Company requires huge cost, time, and effort.