1.

Definition:

Limited Liability Company (LLC): An LLC is a business structure that combines the limited liability
protection of a corporation with the flexibility and tax advantages of a partnership. It offers limited
liability to its members, who are not personally responsible for the company's debts and liabilities.

Public Limited Company (PLC): A PLC is a type of company whose shares are traded on a stock exchange
and can be bought and sold by the public. PLCs are often larger, publicly traded entities with numerous
shareholders.

2. Characteristics:

LLC:

Members: LLCs are owned by members, and there can be one or multiple members.

Limited Liability: Members have limited personal liability for the company's debts and obligations.

Flexibility: LLCs offer operational and management flexibility, and there are minimal regulatory
requirements.

Pass-Through Taxation: Profits and losses are typically passed through to the members and reported on
their individual tax returns.

PLC:

Shareholders: PLCs have a large number of shareholders, and their shares are publicly traded.

Limited Liability: Shareholders have limited liability, and their personal assets are protected.

Regulatory Requirements: PLCs are subject to strict regulatory and reporting requirements, including
financial disclosures.

Access to Capital: PLCs can raise capital by selling shares to the public, making them suitable for large-
scale operations.

3. Advantages:

LLC:

Limited Liability: Members' personal assets are protected.

Pass-Through Taxation: Taxation is simplified, and profits or losses flow through to members.

Flexibility: Fewer formalities in terms of management and operational requirements.

PLC:

Access to Capital: PLCs can raise significant capital by selling shares to the public.

Limited Liability: Shareholders' personal assets are safeguarded.

Transparency: PLCs often have a high level of financial transparency, which can attract investors.

4. Disadvantages:

LLC:

Limited Capital Raising: May have limitations on raising capital from external sources.

Complexity: Regulations can vary by jurisdiction, leading to some complexities in compliance.

PLC:

Regulatory Burden: PLCs face substantial regulatory and reporting requirements.

Loss of Control: Selling shares to the public may result in a loss of control for the original founders.

5. Comparison:

-Ownership:

Sole proprietorship and partnership are owned by individuals or a small group of individuals.

LLC and JSC offer limited liability, while PLC has publicly traded shares with a potentially large number of
shareholders.

-Liability:

Sole proprietors and general partners have unlimited personal liability.

LLC members, JSC shareholders, and PLC shareholders generally have limited personal liability.

-Capital Access:
JSC and PLCs can raise significant capital by issuing public shares.

Sole proprietors and partners have limited access to external capital.

LLCs offer moderate access to capital and can have a flexible ownership structure.

-Regulatory Requirements:

JSC and PLCs are subject to extensive regulatory requirements.

Sole proprietorships and partnerships typically have fewer regulatory obligations.

LLCs have intermediate regulatory requirements and flexibility.

6. Cases

Case 1: Enron Corporation (PLC)

Background: Enron was a major American energy company that filed for bankruptcy in 2001 in one of
the most notorious corporate scandals. Enron was a publicly traded company.

Conflict and Litigation: Enron's bankruptcy resulted from widespread financial fraud, where the
company concealed its debt and engaged in accounting irregularities. Numerous lawsuits and legal
actions were filed against Enron, its executives, and its auditors. The strict regulatory environment that
comes with being a PLC didn't prevent Enron from engaging in fraudulent practices, highlighting that
public companies can still commit fraud. The Enron case highlights that, even though PLCs have the
advantage of raising substantial capital through public shares, they can also face substantial
disadvantages related to regulatory complexities.

Case 2: Sterling Foster & Co., LLC

Background: Sterling Foster & Co., LLC was a brokerage firm founded as an LLC in the late 1990s. It is a
case that exemplifies some of the disadvantages of LLCs.

Disadvantages of LLC:

Limited Regulatory Oversight: One of the disadvantages of LLCs is that they typically have less regulatory
oversight compared to publicly traded companies like corporations. This can create opportunities for
unethical behavior.
Conflict, Litigation, and Fraud:

Sterling Foster was involved in fraudulent activities related to the sale of penny stocks. The firm
allegedly used high-pressure sales tactics and deceptive practices to promote these stocks to investors,
many of whom suffered significant financial losses.

Legal Consequences:

The SEC (U.S. Securities and Exchange Commission) filed a lawsuit against Sterling Foster & Co., LLC,
alleging securities fraud.

The founders and executives of the LLC faced litigation, and the firm eventually went bankrupt.