(a) What is a public limited liability company (b) state and explain any five features distinguishing a public limited company from a partnership

Answer Details

(a) Meaning of a public limited liability company

A public limited liability company is an incorporated business owned by a minimum of seven members with no fixed maximum, whose shares and debentures are offered to the general public and are freely transferable. It is a separate legal entity from its owners, and the liability of each member is limited to the amount unpaid on the shares he holds. It must add the word "Plc" to its name and can only begin business after obtaining a certificate of incorporation and a certificate of trading.

(b) Five features distinguishing a public limited company from a partnership

1. Legal status: a public company is a separate legal person that can sue and be sued in its own name, whereas a partnership has no separate legal personality from its partners.
2. Liability: members of a public company enjoy limited liability, but partners (except limited partners) have unlimited liability for the firm's debts.
3. Membership: a public company has a minimum of seven members and no maximum, while a partnership has from two to a maximum of twenty members.
4. Continuity: a public company enjoys perpetual succession and is not affected by the death or exit of a member, whereas a partnership may be dissolved on the death, insanity or withdrawal of a partner.
5. Transfer of ownership and capital: shares of a public company are freely transferable and it raises large capital from the public, while a partner cannot transfer his interest without the consent of the others and the firm's capital is limited to partners' contributions. (Also, a public company must publish audited accounts, a partnership need not.)