Public LLC vs Private LLC
LLC’s In The US
An LLC is its own distinguishable entity. Meaning it can carry out business under its own identity. In an LLC (Limited Liability Company), the profits go straight to the owners. They also pay tax for the gains, and not the business as a whole. In the case of the owner of the LLC wishing to sell their company’s stocks to the public, they will need to convert their LLC into an S-Corp. LLC, or a public LLC.
A Public LLC, which can also be referred to as an S-Corp., or a PLC (which stands for Public Limited Company) is the legal appellation of an LLC, meaning it offers its stock to the general public. The shareholders are not answerable to any business losses for the sum they have paid for the stock.
The General Differences Between A Public And A Private LLC
As mentioned earlier, an LLC is a business that is under private ownership. Since an LLC is unincorporated, its owners (called members) can be corporations, other people, and other LLCs. In contrast, a PLC is traded publicly on the stock market and sells its stocks to the public.
An LLC is established via filing an “Articles of Organization” document with the Secretary of State your state is present in, along with its fees. A PLC is started with the help of directors (two or more), or stockholders willing to collaborate. The directors, according to how the PLC is agreed upon to be conducted, are required to file “Articles of Association” or “Memorandum of Association” documents. The PLC is then registered and in function.
An LLC is not a separate entity in terms of taxation, it is rather referred to as a “pass-through” entity. The LLC is not required to pay federally charged taxes, although some states charge the overall LLC with a tax.
LLCs are managed by its members, meaning they hold responsibility for the company’s commitments. They also receive protection against any transgressions and/or debts. PLCs are managed under the supervision of an individual director or a board of them. The PLC directors, like LLCs, do not hold liability for any debts. They are, however, responsible for the personal loans that they owe to the PLC.
The Pros and Cons
Whilst having similarities, a PLC and an LLC have their advantages and disadvantages.
PLCs are under constant inspection by the public. Everything from their mode of conduct to the price of the stock and the actions of the directors and board members is also closely watched. The meetings held by PLCs yearly are also attended by the media and company stockholders.
LLCs, on the other hand, have the freedom to be anonymous and make their judgments efficiently. With the board being close-knit, and all the shareholders being present at once. The board members also adjust to changing circumstances quickly.
It is far more convenient for PLCs to sell their stocks because their stock value is well known. Due to this, the company can be evaluated more conveniently.
For LLCs, it is more challenging. This is because their stock value is unknown, in contrast to PLCs.
PLCs are at an advantage in this department, the investment of equity is distributed within a large number of individuals within the public company. Despite the debts having to be paid, the company does not have to pay the shareholders in case it goes bankrupt.
Changing Business Types
An LLC can choose to go public, but it is not the same for a PLC to go private. This requires for the PLC to repurchase its shares and go through some regulation processes.
PLCs have to go through several regulatory processes including the regulations the SEC (Securities and Exchange Commission) imposes and protecting their stockholders by reporting all the requirements involved. A PLC’s yearly reports must also be shown publicly. You can find out more here.