What is a Public Limited Liabilities Company?

Public Limited Liabilities Company:

Public Limited company is also known as PLC and the acronym PLC is used at the end of the name of the company. The PLC signifies that business can sales the share to the public.  The acronym PLC is used in the UK and some commonwealth countries for public listed entities but in the USA INC is used for public limited companies.

Key takeaways:

  • PLC is used in British companies which are equaling to the USA “INC”.
  • Companies listed in the London stock exchange are known as “PLC”.

The abbreviation PLC is used after the name of the company which is registered on the stock exchange and it is mandatory. Because it communicates to the investors and other related parties that it is a public traded entity.

Examples of PLC:

  • All companies listed on the London Stock Exchange will be known as PLC, such as in Fashion Industry Burberry Group PLC, in automaker Rolls Royce PLC.
  • The Top 100 companies listed in the London Stock Exchange will be grouped together in a single index knowing as Financials Times Stock Exchange  100 (FSTE 100)
  • The companies included in FSTE 100 represent the whole economy of the United Kingdom.
  • The largest PLC Company by market capitalization is Royal Dutch Shell.

All PLC companies might not be listed on the stock exchange, a company might choose to not list on the stock exchange or may not meet the stock exchange requirements.

How a Public Limited Company Works?

PLC is a limited liability company that trades its shares in the stock exchange market and investors (general public) can purchase are its shares from the stock market. The share buyers of PLC have limited liability up to the level of their shares. Shareholders cannot be responsible for more than their worth of shares in the company and the maximum loss for the shareholders will be the number of shares.

In the United Kingdom (UK) PLC operates in similar lines for the public corporation in the United States of America (USA).  Their operation is strictly regulated by Limited liability companies (LLC) and published for shareholders and potential investors.

The potential investors and current shareholders of the PLC can evaluate the performance of the company through published information. The regulatory authorities strictly instruct the management of PLC companies to publish true and fair information for the public.

When a PLC publishes its financial statements to the public, it is regulatory requirements that those financial statements must be audited by Independent Auditors.  An Independent Auditor’s report is also published with the financial statements of the company.

Conclusion:

If we conclude our discussion then public limited companies are those companies that are listed on the stock exchange and have the ability to sell their share in the stock exchange market. The shares of Public Limited companies are available for the general public. These companies are often larger in size than public Limited Companies but it is not necessary.

The Companies listed in stock exchanges often represent the economy of the country to the expansion of their operations. These companies have very strict legislative requirements to registers themselves on the stock exchange, most companies often fail to fulfill the stock exchange requirements.

What is a Limited Liability Company?

Introduction:

In this article, we will discuss the Limited Liability Company and understand the limited liability company. We will also discuss the forming of limited, advantages, disadvantages of a limited liability company. Distinguish the partnership and Limited Liability Company.

What is a Limited Liability Company?

A Limited Liability Company is the type of business in which the owner is not individually liable for business liabilities and debts.  These companies are the combinations of characteristics of a corporation with those of sole proprietor and partnership. These companies’ features are similar to the corporation.

Understanding Limited Liability Companies (LLCs):

These companies’ business structure is allowed under state statutes. The owner of LLCs is known as members of the company.  Many states allow these companies anyone can be a member of the company such as individual, foreigners, corporation, and foreign entities but some states prohibit banks and insurance companies to be a member of the company.

An LLC is more formal than a sole proprietor and partnership, these companies follow the articles of the organization. LLC is easy to set up rather than a corporation with minimum requirements. In LLCs member’s wages are deemed to be part of operating expense and will be deducted from the profits of the company.

Forming the Limited Liability Company:

Requirements for forming the LLC might different in different countries, but there are many similarities in forming the LLC in many countries such as members must choose the name of the company before farming.

Once the name of the company is decided then members submit the request in legislative authority to know the availability of the name. If the name is available then those authorities allow using the name otherwise members have to select the name which is not registered.

After confirming the name of the company articles of the organization must be submitted to the state’s legislative authorities.  These articles demonstrate the power, liabilities, rights, and obligation of each member. Other information included the name and addresses of the members and the company’s agents.

Advantages and Disadvantages of LLCs:

Advantages:

  1. LLC restricts the liability of members
  2. LLC is well organized and formal of doing business rather than partnership or sole proprietor.
  3. Articles of the organization are submitted at the time of forming the company, which reduces the conflicts or disputes between members.
  4. In many countries tax rates of LLCs are lower than individuals.

Disadvantages:

  1. Adopting the formalities of the state for LLC will increase the cost of the business.
  2. The state imposes many restrictions on LLCs, which might divert management’s attention from operational activities.

Conclusion:

Forming the LLC is beneficial for a businessman because LLC will reduce the liability of the businessman. The Limited Liability Company has many attractive features for members. Because in LLC business is a separate legal entity and owner is the member of the company, which restricts the liability of the member.

In sole proprietor and partnership, the owner’s business liabilities will not be limited and is liable to settle the business liabilities from personal assets. 

We hope you will understand the importance of LLC, Please leave a comment for us if you have any query or question.

How Business Process Reengineering would influence operational performance?

Business Process Reengineering is the process of rethinking and resigning about the fundamental’s business process in the organizations. Management of the entity consider Business Process Reengineering only for significant process in the entity and to make sure its business could meeting the following factors.

  • Simplification
  • Cost reduction
  • Improved quality
  • Enhance customer satisfaction

My personal word for Business process reengineering is radically and fundamentally change the way how processes are usually running to meet the above objective.

Business process reeginering

Let me clarify about these four main objective of Business process reengineering before we move to the influence of operational performance.

  • First one is simplification. The objective of process reengineering is to make sure that process of doing an activity is as easy as possible. It is start by rethinking about the basis of each of activities and making sure people handing each process could easily understand the process. Process should not involve too many stage to get one activity done. The objective is the result of process complexity that happen in the day to day operation. Then, the reengineering will need to make sure the complexity are not happen again.
  • Cost reduction stand in the second in rank, but it is equally importance in term of the benefit to the entity. The cost reduction here does not mean the reduction in quality.It still focus on the quality that those processes are running and supporting. However, while performing redesign the process, we have to ensure that all of the waste of material or others kind of resource need to be minimizes.Long running process and complexity of the process also incur cost. Therefore, this one link directly with process simplification.
  • Improved quality of the products or services to make sure that the company could compete its business in the market. This is quite importance.  The quality here sometime not exactly the products or service that we sold to outside customers. But it is the quality of output that the process being consider to reengineer are offering.
  • The last objective of Business Process Eeengineering is to enhance customer satisfaction. Business Process Eeengineering need to make sure that all the Business Process Eeengineering provide the benefit to customers. The customers are relies because of quality of products and quality of services. For example, the process are design to make sure after sales services are fast and reliable.

Now let move to the way how Business Process Reengineering would influence operational performance of an entity.

Reengineering would influence into the operation of company by making two main out put. Negative and Positive.

Well, positive or negative will base mainly on how the environment, processes and leadership of project management are. It also affect by the gap of existing and new process is. In some organization, people are enjoy follow the old fashion, or old way of doing thing. People are not fully aware about the new technology and they willing not to adopt the new things. Especially, when we introduce new things.

With such situation, probably there is big resistance from those process holders. In this case, the the project manager who is responsible to make change is not strong enough, the change will not success. Then there will be negative impact. The better way to make sure that the Business Process Reengineering is require project manager to have proper planing.

For example, the project plan schedule need to be prepared. The budget for project need to be approve. The project manager also need to get strong support from key person and senior manager.

If the Business Process Reengineering is success, the company will get many positive affect and appear the better result in the performance. As mention in the objective above, the company’s cost will in decrease as the result of removing the process that is not necessary. Staff who hold the process also feel being motivate because of the process they are doing are importance for the company.

One of the best benefit is the company will receive the positive feedback from its customers because the change will make the process flexible with quality mine set.

Ultimate Guide of Transfer Pricing

The Concept of Transfer Pricing:

Transfer pricing (TP) is the price of goods or services being sold or buy between divisions in the same group or entity. For the divisions that operate in the same jurisdiction, transfer pricing is set for the purpose of performance management, and motivation of division from the group or entity level. Sometime it is setting up to solve the conflict between division. However, for the group that have many divisions operate in the multinational countries, TP is setting for the purpose of complying with law and tax purpose.

To summary, the purposes of transfer pricing are:

  • To keep goal congruence among divisions: Pricing police are normally set to ensure that the decision making at the divisional level are retaining the benefit for both divisions and group as a whole. It is the risky when the decision making are delegate all the power to the divisional level since some division made at the division are benefit at the division but impair group profit.
  • To allow managers to retain autonomy: In the modern performance management, the decision making are delegated to the local manager as they know the situation more that group level. Transfer Pricing is part of modern performance management so that divisions could survive for themselves. Yet, not all of the power and decision are delegates.
  • To permit performance evaluation of division: Divisional performance management is very importance as it is affected the performances, reward and motivation of starts and managements at divisional level. This is one of the most importance parts of TP.
  • Tax Management: For the group companies that have many divisions that operate in different countries and corporate tax rates are different, transfer pricing that manage by group are very importance to make sure that the group pay too much tax or in others words, how the group could save tax.
  • Managing profit for minor shareholders: Well, it might be a bit difficult in this point, but some of the major shareholders are managing profit of the companies and they have the chance to manage the benefit of minor shareholder as well. Mostly through the pricing of goods or services transfer among the group.

Types of Transfer Pricing:

The following are the five types of transfer pricing usually set by the group company and jointly set by the division.

  • Market Price Transfer Pricing: Marketing price is the type of transfer price policies that use available market price of the same or similar products or services in the market as the base price for charging. This type of pricing is fair for both transferring division and receiving division. Both division could compare the price that they are paid and receive to the market price; however, by using Transfer Price, the Transferring Division might not are not spend on transportation fee if they both are in the same country.
  • Adjusted Market Price Transfer Pricing: Adjusted Marketing Price is the type of TP policies that use the available price in the market and make adjustment for some type of expenses that not incurred as the outsider. For example, transport fee.
  • Marginal Costs Transfer Pricing: This kind of pricing is charge at the variable cost incurred at the transferring division. Such pricing might demotivate transfer division as some cost that incurred at their department is not considered. For example, fixed cost is not taking into account.
  • Full Cost Transfer Pricing: The price is charge based on the full cost that incurred at the transferring division. This type of TP have many disadvantages. First, it might be motivating the transferring division not to control the cost of products or services because all of the cost that incurred at the transferring division will be charged to the receiving division. Per group point of view, there is poor cost control and result wasted to the group. Another disadvantage is that the receiving division will be demotivate as they could control the cost that being charge to them.
  • Negotiate Transfer Pricing is the type of transfer price that Group Company delegates the power to its division to have the right to negotiate the prices. This type of TP strategy is almost of same to adjusting market as the prices are decided by both transferring and receiving division.

Issues Need to Consider for International Transfer Pricing

Many of the group of companies now has many international divisions for the purpose of market expansion and low cost strategy. In such situation, transfer pricing play the significant rule and normally there are many issue to consider.

The following are the five issues that need to consider when setting Transfer Pricing for International Division:

  • Exchange Rate Fluctuation: Some of the divisions are operating in the county that have low economic and highly fluctuate exchange rates. For example, the transferring division is operating in the high fluctuation exchange rate; the receiving division will incurred the loss of exchange rate. In such case, hedging currency might need to consider.
  • Taxation Rates: It is for obverse reasons operating in different countries, the group have to expose different tax rates, and the pricing have to set based on those tax rates to ensure that the group does not paid too much tax.
  • Import Duties: Some country try to control and manage the transfer price by setting the price for import or exports. It also the main factors that we need to consider when consider the transfer pricing strategy.
  • Fund Repatriation: The concept of fund repatriation is that the government wants to control the fund outflow from its country by investors through transfer pricing by charging the high prices products or services.
  • Anti-dumping legislation: Such concept that governments want to propose the local products by setting the market price for products export from the country. For example, some of the group companies open the production division in the low labor cost country and the product charge from those countries is at the low price.

Written by Sinra

3 Types of Corporate Strategies

What are the Three Types of  Corporate Strategies?

Cost Leadership Strategy:

Cost leadership is one of the corporate strategies aimed at achieving overall cost leadership in an industry.

In the situation where the companies compete in the industry in which the customers are highly influenced by price, cost leadership assumes strategic importance.

Therefore, it is important that the board of directors understands its cost and cost drivers. They must also be fully cognizant of exactly what constitutes the quality of their target customers group.

The essential task is to deliver the requisite level of quality at the lowest possible cost which allows the pricing strategy of penetration price.

If the organization could attain a cost level that is lower than that of each of its competitors then it could sustain time of falling prices and this the lower prosperity better than its competitors thereby ensuring long-term survival.

Cost leadership might enable the organization to pursue the policies of penetration on pricing.

If the Board of Directors could estimate the total market size, then it is possible to determine what share of the market that they would require in order to realize revenue and profit targets.

Differentiation Strategy:

Product differentiation involves the use of multiple products, each of which is branded and subject to the promotion.

Using this corporate strategy, the competitor must out of necessity to compete in many areas and strive to overcome brand loyalty through reductions in the selling price of their product offerings.

Product differentiation involves the identification of the features for which the customers are willing to pay.

Product differentiation may be related to the product image, quality, reliability, durability or post-sales supports in terms of the availability and quality of after-sales service.

Where the products differentiation can be achieved it may enable the board of directors to implement a pricing strategy based on market skimming, which involves setting a relatively high price stressing the attractions of the new features such as robustness, durability and perceived quality attaching to those with a genuine interest in the product or its association attraction.

Reaction and support are thus solicited form the ‘top end’ of the particular market.

If the launch is successful this ‘cream-skimming’ exercise, and the decision has been taken to invest in the possible, then the appeal of the new product can be enlarged through a shift in advertising and a reduction in price.

The price reduction can be made in stages to coincide with the supply-side increase as new resources come into use.

One of the price requisites for the successful operation of a pricing strategy based on the market difficult for competitors to come up with a similar product quickly with which they can undercut the price being charged by the organization.

If the organization can successfully archive the product differentiation it may also be possible to implement a pricing strategy based upon premium pricing.

Such a strategy would involve pricing its products above the price of the competitor’s products on a permanent basis. The success of such a strategy will depend upon potential buyers perceiving that the product is different and superior to the competitor’s products.

Focus Strategy:

Niche marketing targets markets in which the company can focus on cost and quality in order to meet the need of customers who comprise a specific market.

This corporate strategy, directors could target its products at the specific market segment comprising relatively well-off people who are willing to pay a premium for the unique feature if its product.

It is quite conceivable that such a policy might be aimed at a particular geographical region in which relatively well-off people living.

An organization might meet a need of such a niche segment of the market better than its competitors simply by the concentration of the specific focus on a narrow target market than those of market competitors.

Cost leadership would give the organization the opportunity to develop a cost-focus strategy providing niche customers with a lower-priced product than competitor offerings.

Obviously, such a niche mark would have to be sufficiently large to enable the desired levels of profitability to be attained.

3 Types of Business Entities

Overview:

Before looking into detail of the types of business entities, we would like to introduce the definition of business.

Business is the trading activities from one person, a group of person, entity, and organization in which the purpose of those activities is for generating profit directly or indirectly.

Business is whatever size or nature of activities that could generate profit or return on what they invested directly or indirectly. The business could be formed in commercial or industry commercial transactions in the form of supplying goods or services.

The business rang from a very small entity consist of few members to a very large one that has a hundred thousand staff like Facebook and Google.

And the meaning of profit is the excess of income over the expenses for the period of time.

The following are the list of types of business entities. The list contains four types of business including Sole Trader,

#1: Sole Trader:

Sole Trader or sole trader-ship are the types of business entities that own, run, and manage by mainly one person. Mostly, sole trader-ship employ few employees and have not many business transactions.

Accounting records for the sole traders’ business also not much complicated as the others. This kind of business is normally formed by the entrepreneur and get many exceptions for legal and tax purpose.

The sole trader is not legally separate its debt from the entity one the business go into liquidating. Personnel assets might be used to compensate for the liabilities.

Some advantage of the sole traders are there are less legal requirements, probably got many tax exception, the owner control business and assets directly, and it is very flexible.

#2: Limited Liabilities Companies:

Most of the big companies or the corporation are registered under the limited liabilities companies.

Legally, limited liabilities companies the personnel assets of the shareholder or the owners of the companies are legally separate from the entity or company.

This type of company normally has a complicated management structure as well as the board of directors, many legal documents are required.

The shareholders of this type of the entity normally the companies as well as the individual. The legal documents may be differently required by different legal jurisdictions.

#3: Partnership:

As its name, these types of business entities formed by at least two partners to carry the business. The partners of the business normally expertise in a specific skill or know-how.

Some disadvantages of these types of business entities in every one of the partners owe the liabilities of others. Normally, this type of business got many conflicts.

To form a partnership, the member normally done by partnership agreements.

Advantages of partnerships include:

  • Less stringent reporting obligations – no requirement to make financial accounts publicly available, no audit requirement, unless the partnership has LLP status.
  • Additional capital can be raised because more people are investing in the business.
  • Division of roles and responsibilities and an increased skillset.
  • Sharing of risk and losses between more people.
  • No company tax on the business (profits are distributed to partners and then subject to personal tax).