Private and public limited companies
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Flip to reveal answersDefine a private limited company (Ltd).
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Question
Define a private limited company (Ltd).
Answer
An incorporated business owned by shareholders, where shares are sold privately and shareholders have limited liability.
💡 Hint
Incorporated + private shares + limited liability.
Question
What is the key difference between an Ltd and a PLC in how shares are sold?
Answer
Ltd shares are sold privately to selected investors; PLC shares are sold publicly and traded on a stock exchange.
💡 Hint
Private vs public shares.
Question
Define a public limited company (PLC).
Answer
An incorporated business whose shares are sold to the general public on a stock exchange; shareholders have limited liability.
💡 Hint
Public shares + stock exchange.
Question
State two features of a PLC.
Answer
Shares are traded on a public stock exchange, and the business is owned by shareholders with limited liability.
💡 Hint
Give 2 features: public shares + limited liability.
Question
State two features of a private limited company (Ltd).
Answer
Shares are sold privately to selected investors, and shareholders have limited liability.
💡 Hint
Give 2 clear features (what it IS).
Question
State two similarities between an Ltd and a PLC.
Answer
Both are incorporated businesses with separate legal identity, and both provide limited liability to shareholders.
💡 Hint
Similarities: incorporated + limited liability.
Question
Why can a PLC raise more finance than an Ltd?
Answer
Because it can sell shares to the general public, giving access to a much larger pool of investors.
💡 Hint
Public share issue = bigger capital.
Question
What does limited liability mean for shareholders in an Ltd?
Answer
Shareholders can only lose the value of their investment (their shares) and are not personally responsible for company debts.
💡 Hint
Personal assets protected.
Question
Which type of company typically has greater access to finance, and why?
Answer
PLCs typically have greater access to finance because they can raise funds from a wider public share issue.
💡 Hint
PLC = bigger investor pool.
Question
Explain what is meant by separate legal identity in an Ltd.
Answer
The company is legally separate from its owners, so it can own assets, enter contracts, sue and be sued in its own name.
💡 Hint
Company = separate legal person.
Question
Which type of company is more likely to keep control within a small group of owners?
Answer
Private limited companies (Ltd) are more likely to keep control because shares are not sold to the general public.
💡 Hint
Control stays with selected shareholders.
Question
Why do PLCs usually have less privacy than Ltd companies?
Answer
They must meet strict disclosure rules (such as publishing financial accounts) for transparency to investors and regulators.
💡 Hint
PLC = more reporting.
Question
What is a hostile takeover risk for a PLC?
Answer
Another company or investor can buy enough shares to gain control, potentially against the wishes of current directors.
💡 Hint
Public shares can be bought by others.
Question
What is meant by legal continuity in a private limited company?
Answer
The business continues to exist even if owners change, leave, or die.
💡 Hint
Continuity = continues despite owner changes.
Question
Which type of company has a higher risk of hostile takeover?
Answer
PLCs have a higher risk of hostile takeover because shares are publicly traded and can be bought by outside investors.
💡 Hint
Public trading increases takeover risk.
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Types of business entities
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