Difference between a private limited company and a public limited company
Before starting the article, remember why you are starting a business? Difference between a private limited company and a public limited company? If you are starting a business for your tremendous growth and if you are confused about which company registration is right for your business? And if you’re curious to know, let’s get started. Through this article, you are going to see the difference between private limited companies and public limited companies.
WHAT IS A PRIVATE LIMITED COMPANY?
A company is highly preferred by startups and small businesses who have high aspirations for the company.
It is a privately owned legal entity. it was introduced by the Indian Companies Act, 2013.
it’s divided into three categories.
- Limited by shares: In this type of company, shareholders’ liability is limited to amounts unpaid to the company in respect of shares held by them.
- Limited by guarantee: In this type of
- company, the liability of the members is limited by the guarantee mentioned in the MOA and AOA in case of any loss to the company.
- Unlimited liability: In these types of private limited companies the liability of the members is unlimited. The personal assets of the members may be attached and sold in case of liquidation of the company.
WHAT IS A PUBLIC LIMITED COMPANY?
Indian companies act 2013 introduces the public limited company and is administered by the Ministry of Corporate Affairs.
It sells shares to the public through the stock exchange and collects capital in the name of investment. Hence, it is called a public limited company.
it is a type of separate legal entity like a private limited company. It has a large number of public shareholders.
In this types of company, the shareholders get profit according to the percentage of the shares. Basically, it suits a large entity.
DIFFERENCE BETWEEN PRIVATE LIMITED COMPANY AND PUBLIC LIMITED COMPANY
A private Limited company is traded and owned privately, whereas a public limited company is owned and traded publicly.
2. Transferability of shares:
The transferability of shares is restricted in private limited companies. But whereas the shares can be transferred freely in a public limited company
3. Stock exchange
The private limited company never traded its share on the stock exchange, whereas a public limited company trade its shares publicly on the stock exchange. (The private limited company can not list its shares on the stock exchange)
In a private limited company, it requires a minimum of 2 members and a maximum of 200 members. In a public limited company, it requires a minimum of 7 members and there is no limit to the maximum number of members in a public limited company.
The minimum number of directors required for a private limited company is 2 directors and 3 for a public limited company
6. Qualification of the directors:
No qualifications are required to be a director of a private limited company but some important qualifications and management skills are required to be a director of a public limited company
7. Name of the company:
The suffix of a Private limited company ends with Private Limited. In public limited, the company name ends with Limited.
The minimum paid-up capital for a private limited company is One Lakh. In a public limited company, the minimum paid-up capital shall be Rs. Five Lakhs.
9. Legislation meeting:
Mandatory for the public limited company at a regular interval but it is not mandatory for private limited company.
10. Certificate of commencement:
Not necessary for a private limited company whereas it is necessary for a public limited company.
11. Administrative salary:
No limitation in a public limited company and the private limited company, it does not exist more than 12% of the profit
12. Directors’ retirement:
In a private limited company, directors can be permanent. In the public limited company rotation of retirement is mandatory.
The private limited company has a lot of exemptions and advantages. The public limited company has no such advantages.
14. Submitting the annual report:
Filing the annual report is mandatory in a public limited company but not required in a private limited company.
15. Financial report:
The private limited company’s financial report is not transparent to the public, whereas the public limited company shares the financial report publicly.
What are the advantages of private limited company and advantages of public limited company
The private limited company and the public limited company have some common benefits too,
- Limited Liability
- Perpetual succession
- Separate legal entity
- Can attract inverts
- Can accept foreign funding