N4 Introductory Financial Accounting | Student Book 1.4.5 Personal Liability Company Incorporated (PLC Inc.)


A Personal Liability Company Inc. is a private company that is mainly used by professions such as lawyers, engineers and accountants.


The company’s name must end with the word “Incorporated”. It operates on the principle of ‘personal liability’. This term means that the directors of the company, as well as previous directors, will be responsible for the debts of the company. The owner of a Personal Liability Company Inc. is considered separate from the company. That means the creditors cannot seize the owner’s personal assets.


Owners of a Personal Liability Company Inc. are free to decide how they want to distribute the profits to the members of the company – there are no fixed rules as with a Pty Ltd or CC.


1.4.6 Public companies (Ltd)


A public company is largely set up to offer shares to the general public for the purpose of raising capital. The daily trading of the public company’s inventory determines the value of the whole business.


Publicly traded companies are defined as public because, unlike Pty Ltd businesses, shareholders can be anyone who purchases inventory. Anyone can then become owners of the business.


Public companies are known as limited (Ltd) companies and have their own legal identity.


Advantages of public companies: • You can sell your shares to the public. • Company is listed in the stock exchange. • You can have more capital to work with. • The risk is spread out among the various shareholders.


Disadvantages of public companies: • Setting up a public company is challenging. • Decision making can take longer as more people are involved. • You need to publish some of your documents and annual accounts for the public. • When you go public, you’re selling the ownership of your company to strangers.


1.4.7 Close corporations (CC)


Membership to a CC is limited to ten members. Profits are distributed via distribution to members. A CC is similar to a company in that the CC is a legal person and as such the business is responsible for debts and losses of the CC.


Close corporations entities are no longer allowed to be registered. Existing close corporations are still valid entities.


1.4.8 Non-profit companies (NPC)


A non-profit company is incorporated public that is established, as an example, for some form of cultural or social activities or communal / group interests. Income is not distributed to any stakeholder from this type of business structure.


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