There are many types of companies, the most popular of which
are Private (Pvt. Ltd. and Public (Ltd.). Both private and public limited
companies have their own advantages and disadvantages
An entrepreneur has to make a choice based on his or her
funding plan let’s take a look at the difference between the private and public
limited companies.
What is a private limited company?
A private limited company is a business entity operated by private owners .This type of organization restricts the responsibility of the owner to their share of the ownership and restricts the share to the publicly traded shareholders.
Benefits of a private limited company:
Member: Under the
Companies Act 2013 you can start a private limited company with a minimum of 2
members and a maximum of 200.
Limited Liability:
The liability of each partner or member is limited .This means that if the
company suffers, the company’s shareholders are responsible for selling their
company shares to eliminate the company or liability clear. The personal or
personal property of the partners or members is not in prospect.
Traditional
Inheritance: According to company rules, the traditional inheritance means
that the company continues its existence, as any owner or member dies, goes
bankrupt, exits the business, and transfers his or her share to another.
Prospectus:
Prospectus is a detailed description that needs to be provided by a company
that is going to be public. However, private limited companies do not need to
provide a prospectus because the public is not invited to subscribe for the
company’s share.
Number of Directors:
A private limited company requires a minimum of 2 directors At least one
director on the board of directors will be in India for a total of fewer than
182 days in the previous calendar year. Directors and partners can be the same
person.
Capital: The
minimum share capital required is only Rs 1 lakh.
What is a Public company?
A public company is a company that allows the general public to provide registered security through the initial public offer (IPO) and it is traded in at least one stock exchange market. A public company is not allowed to start its business after granting its certificate. In order to be eligible to run as a public company, it must obtain another document called a trade certificate.
Benefits of a Public Limited Company:
Membership: In
order for a company to be public, it must have a minimum of 7 member’s maximum
unlimited.
Limited Liability:
The liability of a public company is limited No shareholder is personally
responsible for the payment Public Limited Company is a separate legal entity,
and each shareholder is a part of it.
Board of Directors:
A public company is run by a Board of Directors. It should have a minimum of 3
and can have a maximum of 15 board directors. At the annual general meeting,
they are elected by the company’s shareholders from among the partners. The
elected director's act as representatives of the partners in the management and
decision-making of the company Having a large board of directors, therefore,
benefits all stakeholders in terms of transparency as well as the democratic
governance process.
Transparency:
Private limited companies are strictly regulated and are required by law to
publish their full financial statements every year to make sure their real
financial position is clear to their owners' partners and potential investors.
It also helps determine the market value of its shares.
Capital: A public
company can raise capital from the public by offering shares through the stock
market. Public companies can raise capital through bond and equity issuance,
which is an insecure loan issued to a company based on the company's financial
performance and integrity.
Transferable Shares:
Shares of a public limited company are bought and sold in the market. They are
freely transferred between members and people trading in the stock market.
The main difference between public and private limited company:
The distinction
between Public and Private companies can be clearly drawn on the following
basis:
- A public company refers to a company that is listed on a recognized stock exchange and trades in public. A private limited company is one that is not listed on a stock exchange and is held by members individually.
- There must be at least seven members to start a public company. Against this, a private company can be started with a minimum of two members.
- There is no roof over the maximum number of members in a public company On the other hand; a private company can have a maximum of 200 members under certain conditions.
- A public company should have at least three directors when a private limited company can have a minimum of 2 directors.
- In the case of a public company, it is mandatory for members to call a general assembly fraud, while in the case of a private company, there is no such obligation.
- In a Public Limited Company, at least five members must be personally present at the Annual General Meeting (AGM) to constitute the requisite quorum. Where as, in the case of a private limited company, this number is 2.
- A public company can invite the general public for the company's shareholders .In protest; a private company has no right to invite the public.
- In the case of a public company, prospectus statement issues are mandatory instead of prospectus, but not in private companies.
- Transferring shares of a Pvt Limited Company is completely prohibited On the other hand; the shareholders of a public company can freely transfer their shares.
- To start a business, a public company needs a certificate to start a business once it is included. On the other hand, a private company can start its business after obtaining a certificate.
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