Disadvantages of Public Limited Companies

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Reading Time: 2 minutes| (Last Updated On: September 10, 2018)

Disadvantages of Public Limited Companies

The advantages of Public Limited Company might stimulate you to start one, but all that glitters is not gold. And to invest in Public Limited Company you must be ready for some obstacles too. Let us discuss what disadvantages of Public Limited Companies the Zeus comes up with.

  • Red Tapism & Nepotism: Get ready to stand in long queues as a PUBLIC LIMITED COMPANY has to undergo too many legal formalities. Too much of legal formalities further lead to delay in every decision of the Public Limited Company. Thus with the involvement of public, the broad negatives of public sector undertakings also come into the play.
  • Controls and regulations: Public Limited Companies are governed by large no of Acts, rules & regulations. Higher is the external degree of control on the internals and lesser the autonomy rests in the hands of directors. If you are a flying bird, you better curb your feathers soon.
  • Inflexibility: Thanks to its democracy and high degree of external control that we get another con. Rapid decisions could not be taken in a Public Limited Company, thus imparting rigidity in decision making (undesired) to the company. Again free birds cannot fly here.
  • Lack of secrecy: You will have to maintain transparency in operations and involve the general public in your decisions. Thus even business secrets are not secrets. If you are confident enough in your idea and it doesn’t bother you to share the delight with almost everyone, you may go for it.
  • Distribution of profits: You will be left with very less profits in hand as the profits are also to be distributed among “I can’t even count” no. of shareholders. Per head gain is significantly reduced.
  • Suitability: Public Limited Company are not suitable for all types of business activities. Small scale businesses which cater to the needs of limited section of the society, need not be incorporated as Public Limited Company. It is best suited for large scale businesses only.
  • High costs: All the delight that Public Limited Company provide does not come without any cost. Starting up a Public Limited Company requires huge cost, time, and effort. Profits are high only when investment is too. Thus initiation as well as dissolution are like climbing Everest.

Merely knowing the disadvantages and ignoring the advantages will never let you get a clear idea of what actually the Public Limited Company have in store for you. To know about the benefits you can visit the link : Advantages of a Public Limited Company

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