In the UK, there are two different types of company structures – private and public limited companies. Both come with their own benefits and drawbacks. In this guide, we’ll dive into the differences between the two types of companies, how to start each one, and how to transition from one to the other.

Private limited companies (LTD) are the most common, with over five million registered in the UK. In comparison, there are only around 100,000 public limited companies (PLCs). 

The difference between the two is simple: a private LTD company is owned by private shareholders, with new shares only available to buy and sell privately, while a PLC’s shares are publicly traded on the stock exchange. There are other differences, such as capital requirements and regulatory requirements, which we’ll explore in more detail in this guide. 

For the overwhelming majority of people who start a business, a private limited company is the way to go (for reasons that will become extremely clear in this guide.) At Crunch, we help limited companies with everything from formation to bookkeeping and tax filing. 

If you’ve arrived at this guide because you’re interested in starting a business or even going public, then book a call with our expert accounting team today. 

Let’s dive into the LTD vs PLC comparison…

What is a public limited company (PLC)?

You’ve heard of the FTSE 500, the top public companies operating on the London Stock Exchange. However, that’s not an exhaustive list of all PLCs. A public limited company is simply a company listed on a stock exchange, typically with publicly traded shares (although this is not always the case; see unquoted PLCs). 

A PLC must raise significant capital ahead of its IPO (initial public offering), when the company first transitions from a privately-held company (or a public sector organisation like Royal Mail), to a public limited company.

PLCs are also held to a much higher standard of regulatory compliance, including more frequent and detailed finance reports and transparency requirements. 

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What are the key differences between a LTD company and a PLC?

Here’s a simple side-by-side comparison of the two types of companies:

This table gives you an overview of the differences, but they’re a little bit oversimplified. For example, the regulatory compliance section mentions the transparency requirements for PLCs – but there are also unique extra requirements placed on specific industries. 

Corporate identity: who owns what?

Since the biggest difference between private and public limited companies is the ownership structure, we’ve dedicated this entire section to clarifying how this works for both types of business.

A private limited company is typically structured as follows:

• At least one shareholder who is a natural person. If you're wondering how to add shareholders to a Limited company - don't worry we've got you covered!
• At least one director who is a natural person. We'd recommend reviewing our article about director's responsibilities for more information.
• At least one ‘share’ per shareholder
• No legal minimum share value, but typically the nominal value is £1 per share
• Shares are privately bought and sold
• There may be an appointed Company Secretary, who is responsible for administrative tasks such as filing with Companies House, although this is not a legal requirement.

A public limited company is typically structured as follows:

• At least two shareholders, at least one of whom is a natural person
• At least two directors, at least one of whom is a natural person
• At least one ‘share’ per shareholder
• A minimum share capital of £50,000 upon formation, but there is no specific minimum value per individual share. The nominal value of each share may be as little as one penny per share
• Shares are publicly traded, typically on a stock exchange, but not necessarily (unquoted PLCs might be too small, have too few shareholders or be delisted from a stock exchange.)
• A Company Secretary is a legal requirement for all PLCs

How share trading works for private and public companies

Both types of companies have ‘shares’ – but only PLCs allow members of the public to buy in and ‘invest’. Limited companies can also sell shares, but how they do it is very different and far less common. 

Selling shares as a private company (LTD)

Private companies can sell shares to other individuals, whether to hire new directors or raise capital with specific investors. Any sale usually requires approval from existing shareholders and may require a written agreement. Compared to public companies, there are fewer regulatory requirements, and most sales are negotiated and agreed upon privately. 

Selling shares as a public company (PLC)

Public companies list shares on the stock exchange, which the public can freely buy and sell. Because shares are available publicly, prices are subject to significant fluctuations driven by economic conditions. To raise capital, a PLC can issue shares through public stock offerings, but doing so dilutes control of the business since ownership is diluted through multiple shareholders. 

Public companies are subject to strict legal and regulatory requirements that mandate financial reporting and adherence to specific governance standards. 

Leadership and governance: directors, secretaries, and decision-making

There are many decisions to make in both types of company, so choosing who has control is imperative. LTD companies must have at least one director, whereas PLCs need a minimum of two. Though it is optional for private businesses, public companies must also appoint a company secretary to oversee legal and regulatory compliance. 

Other than appointing directors and secretaries, the biggest difference between each type of company is in how decisions are made. Public companies have to follow stricter rules to ensure transparency and accountability, with a focus on managing risk and appeasing all interested parties. In comparison, a private company can largely act as it ways (provided it stays within the law). 

PLCs also have to host an Annual General Meeting (AGM) to allow shareholders to review financial aspects of the business and agree to decisions like appointing new directors or approving dividends. 

This is only a summary of the responsibilities of each type of business, but hopefully, it illustrates how much more is required of a PLC when compared to an LTD. 

Raising capital and funding pathways

We’re online accountants– so believe us when we say that one of the most important matters in either type of business is how you go about raising capital. 

How each type raises capital

Public limited companies are designed to allow businesses to raise capital by issuing shares to be sold to the public through a stock exchange. This allows them to attract a wide range of investors, from casual members of the public who want to invest through to experienced professional investors.  PLCs can also issue bonds or take out corporate loans to raise cash.

Private limited companies can’t sell shares to the public and instead rely on selling privately like we’ve mentioned above. Owners can choose to sell shares in a strategic way to private investors. Securing funding often requires negotiations with investors or financial institutions, and investment decisions tend to focus on long-term business potential rather than market demand.

Regulatory issues

Selling shares isn’t a simple matter you can do whenever your cash flow dips. Public companies are beholden to some rigorous financial reporting and disclosure rules. Listing shares means meeting regulations set up by the Financial Conduct Authority (FCA) and the London Stock Exchange (LSE). PLCs must also regularly publish audited financial statements, adhere to corporate governance rules, and inform investors about business performance.

Private companies don’t need to disclose financial details to the public. If you’re selling shares in an LTD company, they are only worth what any potential buyer agrees to pay – which can make selling shares and raising capital much harder as a private company. You must still comply with any contractual obligations and general company law. 

Which is better for raising cash?

Public listings provide liquidity, allowing shareholders to buy and sell shares freely – making it easier to raise money quickly. Owners within private companies, by contrast, have to be more controlled in how they raise capital. Finding large-scale funding in a private company can be much more complicated, but you enjoy the benefit of more reliable long-term planning because you’re not affected by the pressure of fluctuating share prices.  

Legal protections: limited liability and beyond

Both LTD and PLC businesses enjoy something called limited liability. This is a legal term that means shareholders are not personally responsible for the company’s debts beyond the amount they have invested. If your business fails, your personal assets remain protected – you’ll only lose the capital you’ve invested into the company.

Private companies are relatively low risk because you have fewer shareholders and don’t have to publish financial information. Public companies, however, are subject to strict regulations and public scrutiny. They must share financial reports and have a duty to protect investors. Even if a PLC encounters legal issues, shareholders’ liability remains limited, regardless of market conditions or company performance. 

Limited liability is a great thing for both types of companies as it reduces your personal financial risk. One big thing to note is that PLCs need a minimum share capital of £50,000 – which means shareholders have to risk greater amounts of cash when compared to private companies (where share values can be as low as £1). 

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Transitioning from LTD to PLC (and vice versa)

Companies may choose to go public or remain private – but it’s no easy decision. It’s usually a choice made after a lengthy period of consultations with other stakeholders, accountants and legal advisors. 

To help you understand what’s involved, here’s a quick overview… 

Going public: converting an LTD into a PLC

A private limited company may want to re-register as a public company to be able to sell shares to the public. To do so, you’ll need to have a paid-up share capital of at least £12,500 and at least two directors. You’ll also need a company secretary on record with Companies House so you can comply with the Companies Act. 

Once those things are in place, you can begin the transition by applying to Companies House. However, this is a complex process that requires specialist legal support. 

Going private: converting a PLC into an LTD

If the shareholders in a PLC feel they are no longer benefiting from operating a public company, you can change it to a private one to reduce financial and reporting requirements. However, the process is a LOT more complicated. There are three situations in which a PLC can change status, as defined by the Companies Act 2006: 

• Shareholders pass a special resolution (requires at least a majority vote).
• Obtain a court order to reduce the capital of your company.
• Change following a cancellation or re-denomination of shares that reduces the value of issued share capital below the minimum for a PLC (£50,000). 

Is it worth the switch?

In many ways, even this guide isn’t the place to answer this question. Changing status is such an important decision that it can only really be made with lots of strategic thinking and dedicated legal support. This is why we'd always recommend speaking to a professional who knows your specific situation before committing to make large changes to your company.

Which structure should you choose?

It’s pretty obvious which type of company is best for the majority of people – with over 5 million private companies in the UK compared to just 100,000 public ones. However, it’s not a popularity contest, deciding on a structure is about choosing the right option for you. 

Though we imagine most people reading this guide will opt for a private company, here’s a simple comparison to help you decide…

• Control: Owners in a private company have more control, whereas PLCs spread ownership amongst shareholders which dilutes ownership. 
• Raising capital: Private companies need to use business loans or negotiate sales to other private investors. Public companies can sell shares on the stock market. 
• Risk: Both companies enjoy limited liability, but PLCs are more at risk due to market value fluctuations.  
• Costs: LTD businesses cost less to start and are cheaper to run. PLCs have high running costs due to additional compliance and investor obligations. 
• Privacy and compliance: A private company keeps information private, whereas public ones have to issue financial performance updates. 

A note on tax

At Crunch, we help businesses control their finances and deal with tax obligations. Tax for both types of companies is actually the same – both are subject to corporation tax. If you’d like to learn more about what this means, read our guide to how much is corporation tax for a limited company?

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