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Q&A - What are the main advantages and disadvantages of being a private limited company?

Sunday, February 01, 2009
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What are the main advantages and disadvantages of being a private limited company?

A private limited company is the most common form of company.  The shares of a private limited company are not available to the general public to buy and sell on a recognised stock exchange. The company is owned by shareholders and they enjoy “limited liability” – i.e. the most they can lose is the amount they have invested in their shares.

Advantages
Limited liability – by far the most important advantage of incorporation.  Limited liability protects the personal wealth of the shareholders
Easier to raise finance – both through the sale of shares and also easier to raise debt
Stable form of structure – business continues to exist even when shareholders change
Provides more privacy of information than an public limited company

Disadvantages
Greater admin costs (though much cheaper than being a public company)
Public disclosure of company information (annual report & accounts + annual return)
Directors’ legal duties (set out by Companies Act)




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