Business Structures: PLC, SP, and LLP

Private Limited Company (PLC)

• A PLC is owned by a maximum of 50 shareholders.
• Shareholders lack control over business operations.
• Shareholders are shielded from personal liability for business debts and losses.
• Shareholders only risk losing their initial investment.
• PLCs typically have more access to bank financing due to available business assets serving as collateral.

Sole Proprietorship (SP)

• An SP is owned and controlled by a single individual.
• Banks are often hesitant to lend to SPs due to limited personal assets to use as collateral.
• Financial resources are limited to the owner's personal funds.
• The owner assumes full responsibility for business debts and losses, potentially risking personal assets.
• The owner has complete control over the business.
• The business's lifespan is tied to the owner's existence.

Limited Liability Partnership (LLP)

• An LLP is owned by two or more partners.
• LLPs typically secure financing more readily due to the combined personal assets of partners as collateral.
• LLPs benefit from pooling capital and resources from multiple partners.
• Partners are generally protected from personal liability for business debts and losses.
• Liability is limited to the individual partner responsible for the debt or loss.
• LLPs continue to exist until formally dissolved or struck off the register.

Stakeholders and Their Interests in a Business

• Owners and Shareholders are interested in the financial success of the business.
• They decide whether to continue investing or sell their shares.
• Managers are responsible for the day-to-day operations of the business.
• They focus on improving performance and achieving objectives set by owners.
• Employees are interested in job security and fair compensation.
• They consider whether to remain employed at the business based on working conditions and opportunities.
• Lenders are concerned with the business's ability to repay loans.
• They decide whether to grant loans based on the business's creditworthiness and financial stability.
• Suppliers provide goods or services to the business.
• They consider the business's reliability in paying for goods when deciding whether to sell on credit.
• Customers are the buyers of goods or services offered by the business.
• Their decision to purchase depends on factors such as price, quality, and customer service.
• Government monitors businesses to ensure compliance with tax regulations.
• They are concerned about tax revenue generated by businesses and may adjust tax rates based on industry and performance.

Business Types

• Trading businesses buy and sell goods to customers.
• Service businesses provide services to customers.

Business Ownership Structures

• Sole Proprietorship:
  • Owned by one person.
  • Funding is limited to the owner's contributed funds.
  • The owner has absolute control over the business.
  • The business exists as long as the owner is alive and willing to continue.
• Limited Liability Partnership:
  • Owned by two or more people.
  • Partners are not liable for debts and losses beyond their individual investment.
  • Control is shared among partners.
  • The business exists forever until wound up or struck off.
• Private Limited Company:
  • Owned by 50 or less shareholders.
  • Shareholders are not liable to pay any debts or losses; they only forfeit their investments.
  • Shareholders have no control over the business.
  • The business exists forever until wound up or struck off.

Stakeholders

• Owners and Shareholders:
  • They decide whether to continue investing in the business or sell it.
• Managers:
  • They consider ways to improve the business's performance.
• Employees:
  • They decide whether to continue working at the business.
• Lenders:
  • They decide whether to grant loans to the business.
• Suppliers:
  • They decide whether to sell to the business on credit.
• Customers:
  • They decide whether to buy from the business.
• Government:
  • They ensure the business complies with tax regulations and determine how much to tax the business.

This quiz explores the key characteristics of Private Limited Companies (PLC), Sole Proprietorships (SP), and Limited Liability Partnerships (LLP). Test your understanding of ownership, liability, and financing aspects inherent to these business structures.