ACCA Applied Knowledge · Business and Technology · The purpose and types of business organisation
Which statement correctly distinguishes a public limited company from a private limited company?
A public limited company is permitted to offer its shares to the general public, while a private limited company is prohibited from doing so. Both types give shareholders limited liability and both have directors, so the distinction lies in the right to raise capital from the public.
- AA public company may offer its shares to the general public, whereas a private company may notCorrect
- BA private company has unlimited liability for its shareholders
- CA public company need not have a board of directors
- DA private company must have its shares traded on a stock exchange
Explanation
The key legal difference is that only a public company may offer its shares to the public, and it need not be listed to do so in every case. Both types have limited liability for shareholders, and both need directors. Private company shares are not traded on an exchange.
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