What is a public limited company (PLC)?

A PLC is a company that’s legally separate from you – so if it goes bust you only have to pay its debts up to the value of your shares. You can raise capital by selling shares in the company to the public, and you list these shares on a stock exchange.

To set up a PLC, you have to have two or more shareholders, and issue at least £50,000 worth of shares (you can stop there if you want – you don’t have to offer any more shares to the public). You’ll need to register your company at Companies House.

The good stuff

• Your savings are safe

  The law sees PLCs as separate from their owners. That means that if your company goes bust, you’ll only be responsible for paying debts up to the value of the shares you own.

• You’ve got more options for investment

  You can sell shares in your PLC to the public, which gives you a much larger source of investors.

• You get more credibility

  When people see those three letters on the end of your company name, they’re likely to take you more seriously. One of the reasons for this is that they can check your annual accounts at Companies House, so they’ll be able to see how well (or not) your business is doing.

• You could pay less income tax

  Your company will pay corporation tax on profits. You then pay yourself a salary, which you top up with dividend payments from your shares. This should mean you pay less in income tax and National Insurance than you would as a sole trader. Limited companies also get more tax-deductible costs and allowances.

The not-so-great stuff

• Extra admin

  Setting up as a PLC means paperwork. You have to register with Companies House, and pay a fee to do it (you might want to talk to a formations agent about this – you’ll probably find it’s cheaper than going direct). And there’s a lot of day-to-day record keeping, including (deep breath) income, expenditure, assets and liabilities, copies of all accounts and statutory filings, meeting minutes, and directors’ and shareholders’ decisions.

• Your information will be on display

  As a PLC, your financial information will be there to see for anyone who wants to look at it. You’ll have to get your trading results audited and the public will be able to see the annual accounts you file with Companies House.

So what’s the difference between a public limited and a private limited company?

The main thing is who you can sell your shares to. A PLC can sell its shares to the public, but a private limited company can’t. It can also list those shares on a stock exchange. In fact, PLCs are the only type of company who can use public investment like this to raise capital.

You can change a private limited company to a PLC by applying to Companies House. It goes the other way as well – you can change a PLC to a private limited company by doing the same thing.

In a nutshell

If you decide a PLC is for you, you’ll need two or more shareholders to set it up and issue at least £50,000 of shares. The company will be legally separate from you, so you’ll only be responsible for debts up to the value of your shares if it goes bust. You can raise capital by selling shares in your company to the public, and you list them on a stock exchange.