The Differences Between a Public Corporation & a Public Limited Company

The term "public" refers to the public's ability to purchase shares of stock.

The terms "public corporation" and "public limited company" sound like synonyms. The companies that fit into each category share some things in common but are, in fact, completely different. To understand the difference, you must first define the terms.

Public Corporation Defined

A public corporation is a U.S. company whose stock shares are traded publicly via a stock exchange like the New York Stock Exchange. A company can "go public" by having an initial public offering (IPO) of its stock. An IPO is the very first time a company's stock is offered for sale to the general public. This can be a risky investment with potential big pay-offs for those willing to gamble. When a company is a public corporation, its financial statements must be available for viewing by the general public.

Public Limited Company Defined

A public limited company is also a publicly traded company. Public limited companies (PLC) are United Kingdom companies whose stock shares are traded on the London Stock Exchange. Anyone can acquire the shares of a PLC, and you are only subject to lose the amount that you have invested. PLCs are the only companies that can be traded on the London Stock Exchange.

Differences

One of the main differences between a public corporation and a public limited company is geographical. The public corporation is based in the U.S., while the PLC is based in the U.K. Another main difference is that public corporations in the U.S. are governed by Sarbanes-Oxley. This requires them to disclose extensive financial information and make it readily available to potential investors – the public. PLCs also must meet certain requirements before earning the designation. These include a minimum share capital, obtaining a trading certificate, a minimum of two directors and a two shareholder minimum. A PLC is subject to the Registrar of Companies in the U.K.

Advantages

There are many advantages to both types of public company versus a company remaining private. Some of the advantages of a PLC include possible tax-related advantages, increased access to capital and greater liquidity. There is also a level of prestige that a company attains when becoming a PLC, because only PLCs can be traded on the London Stock Exchange. There are many similar advantages for the U.S. based public corporation. When companies go public, they immediately generate large amounts of capital that can be used to invest in needed assets or pay off debt. From the perspective of an investor, a great advantage to investing in a public corporation is access to a huge amount of the company's financial information.

references