What is a company?
The company cites that voluntary association of persons which is established to achieve common goals. It is a separate legal entity, i.e. one should not bewilder the company and its members as both are different personalities in the eyes of the law. Moreover, it is characterized by perpetual succession, common seal, capacity to sue and be sued, and capital divided into transferable shares.
Public Limited Company and Private Limited Company
A public limited company is a company that is listed on a recognized stock exchange and its shares are traded in the market freely. On the other hand, a private limited company is a company that is not listed on any recognized stock exchange and hence is not traded. It is privately held by members only.
In the case of a public company, it is compulsory to call a statutory general meeting of members. However, there is no such demand in the case of the private limited company. The issue of the prospectus is mandatory in the case of a public company but it is not so in the case of a private company. The public company requires a certificate of commencement post-incorporation. However, a private company can start its operations soon after obtaining the certificate of incorporation. There is a restriction on the transfer of shares in private limited companies. While the shareholders of a public company can transfer their shares freely.
Since there is a limited number of people and fewer restrictions, the range of a private limited company is limited. On the conflicting, the scope of a public company is huge. This is because the owners of the company can elevate capital from the general public and have to follow many legal restrictions. There is a greater managerial burden on a public limited company. This is because a great amount of details has to be made available to the public who are shareholders or prospective shareholders. A lot of money has to be infused in order to prepare reports and disclosures that match the regulations provided by SEBI.
|Features||Public Ltd Company||Private Ltd Company|
|Invitation to public||Yes||No|
|Quorum at AGM||5 members||2 members|
In situations where a public company no longer wishes to employ within the business model, there is a choice for it to return to the private limited company. This can be done by acquiring back all outstanding shares from the current shareholders. The company is expelled from the stock exchange where it has registered once this purchase is done. It will then return to utilize as a private limited company.
The public and private sectors occasionally partner to complete goals, such as construction or transportation projects. However these two sectors constitute some compelling differences, including:
The most compelling difference between the private and public sectors is the ownership of the organizations within them. In the public sector, organizations are possessed and controlled by the government. Meanwhile, organizations within the private sector are owned and directed by individuals or private companies.
Some state-owned enterprises participate in economical activities or make a profit. However, organizations in the public sector tend to serve the primary purpose of assisting the public by granting services. In the private sector, businesses have the primary motive of making profits.
- Financial support
Organizations within the public sector collect financial assistance and funding from the government. These reserves may come from direct and indirect taxes. However, some public sector organizations, such as the U.S. postal service, create revenue. In the private sector, organizations may collect some financial support but typically fund themselves using their revenue, issuing shares, or taking out loans.
Employees working in the public sector work for public concerns or local, state, and associated governments. Their salaries are generally paid for by tax dollars. In the private sector, individuals work for an exclusively owned business or a publicly-traded company.
Both public and private companies have differences in operating and share description provision overall. The minimum capital demanded is larger in the public company, whereas it is smaller in a private company that is being adhered to by a private group or individual. The minimum number of directors is more in a public company and it is only two in a private company.
The suffix in the name provides a recognition tag to know if a company is held by the public or private sector. The share conveys also takes place only in a public company, and it isn’t cramped like in a private company.
We assist our clients in dealing with compliances related to company incorporation, business setup, ROC filings, winding up of the company, etc. If you have any questions or would like to know more about public and private limited companies, kindly contact us.