Difference between Public Limited and Private Limited Company

Before initiating a business, one must be well informed of the different types of business set-ups and the implications of their structure. Here we discuss the basic differences between a Limited and Private Limited company. To start with, both public limited and private limited companies are forms of joint stock companies. We can say a joint stock company is a kind of business organization that has multiple owners.

What is Private Limited Company?

In a Private Limited company, a minimum of 2 owners must be there and the maximum number of owners is 50. In case of a private limited company, there are restrictions in place with regard to the transfer of shares. The shares of a private limited company cannot be transferred freely as can be done in the case of public limited company. Know that the shares of a public limited company can be transferred without any restrictions on a stock exchange.

A private limited company can never call in the public to buy its shares or debentures. It can also not accept deposits from the public other than its owners, directors or their relatives.

The minimum paid up share capital requirement for a private limited company is rupees one lakh. This means that the owners must first pool in a sum of rupees one lakh from their own pockets before starting the business towards the capital. Every private limited company must have the suffix “Private Limited” at the end of its name (Ex: XYZ Pvt. Ltd.).

What is Public Limited Company?

A public Limited Company is a kind of joint stock company that is not a private limited company in the first place. In case of a public company, there are no restrictions whatsoever on the transfer of shares. The shares of a public limited company can be transferred freely on stock exchanges. In a public limited company, there must be a minimum of 7 members and there is no upper limit to the number of members that a public limited company can have.

The minimum paid up share capital requirement for a public limited company is rupees five lakhs. This means that the owners must first pool in a sum of rupees five lakhs from their own pockets before starting the business towards the capital. Every public limited company must have the suffix “Limited” at the end of its name (Ex: XYZ Ltd.).

A public limited company must have a minimum of 3 directors. Directors are the representatives elected by the shareholders or owners to administer the business on their behalf. The directors of a public limited company must give their consent in writing to the Registrar to function as the director of the company. They must also sign an undertaking to acquire the qualification shares of the given public limited company. A public limited company can start its operations only when it has received a Certificate to commencement of business.

A public limited company can call in the public to buy its shares. It can also accept deposits from the general public.