What is the difference Between Private Limited Company and Public Limited Company?
Introduction
Choosing the right business structure is an important decision for any entrepreneur. Two common types in India are the Private Limited Company and the Public Limited Company. While both offer limited liability and a separate legal identity, they differ in terms of ownership, compliance, and how they raise funds. In this blog, we’ll explain the key differences between these two company types in simple terms.
What is a Private Limited Company?
A Private Limited Company represents a popular business structure in India, especially among startups and small businesses. Private individuals own it, so the general public cannot buy its shares. The authorities register the company under the Companies Act, 2013, granting it a legal identity separate from its owners. Shareholders hold limited liability, restricted to the amount they invest in the company.
What is a Public Limited Company?
A Limited Company, often referring to a Public Limited Company (PLC) in India, raises capital from the general public by issuing shares. The Companies Act, 2013 governs its operations, and it enjoys a separate legal identity from its shareholders. Each shareholder is liable only for the amount they have invested.
Key difference Between a Pvt Ltd Company and a Public Limited Company
Although both Private Limited Companies and Public Limited Companies provide limited liability and a distinct legal identity, they differ greatly in terms of ownership, funding, compliance, and public access. A Private Limited Company is more suitable for closely-held businesses with limited members and restricted share transfers, whereas a Public Limited Company is ideal for large scale enterprises looking to raise capital from the public and list on stock exchanges. These differences directly impact how each type operates and grows in the market.
Below table will provide you a clear difference between a ptd ltd company and a limited company;
| Aspect |
Private Limited Company (Pvt Ltd) |
Public Limited Company |
| Ownership |
Owned by private individuals, families, or groups |
Owned by public shareholders |
| Minimum Members |
2 |
7 |
| Maximum Members |
200 |
No limit |
| Share Transferability |
Shares cannot be freely transferred |
Shares can be bought or sold by anyone |
| Raising Funds |
Cannot raise funds from the public |
Can raise capital through public issue of shares |
| Stock Exchange Listing |
Not permitted |
Can be listed on recognized stock exchanges |
| Disclosure & Compliance |
Lower compliance; financials remain private |
High compliance; must publish financials and comply with SEBI norms |
| Board of Directors |
Minimum 2 |
Minimum 3 |
| Use of Company Name |
Ends with “Private Limited” |
Ends with “Limited” or “Public Limited” |
| Suitability |
Best for small and medium enterprises or family-owned businesses |
Suitable for large companies planning to raise public investment |
Benefits of a Private limited Company and Public Limited Company
Private Limited Company
- Limited Liability Protection: Shareholders safeguard their personal assets because they limit their liability to only the amount they invest in the company. This limitation reduces financial risk for business owners in case of losses or debts.
- Separate Legal Identity: A Private Limited Company is a distinct legal entity from its owners. It can own assets, open bank accounts, and enter contracts in its own name, offering legal independence.
- Credibility and Investor Preference: Because the Companies Act registers it, banks, clients, and investors trust it more. Startups often choose this structure to attract venture capital or angel funding.
- Perpetual Succession: The company’s existence is not affected by changes in ownership or management. It continues to operate even if shareholders leave, resign, or pass away.
- Efficient Management with Control: A limited group holds ownership and makes decisions, enabling faster decisions and better control. The company does not publicly trade its shares, which reduces outside interference.
Public limited Company
- Access to Public Capital: A Limited Company can raise funds by issuing shares to the public through stock exchanges. This makes it easier to gather large-scale capital for business expansion.
- Limited Liability for Shareholders: Just like private companies, the liability of each shareholder is limited to their shareholding. Their personal assets remain protected from business liabilities.
- Wider Ownership and Easy Share Transfer: Shares are freely transferable, enabling more liquidity and attracting a large base of investors. This also simplifies exit options for existing shareholders.
- Enhanced Brand Image and Visibility: Being publicly listed increases trust and brand recognition. It helps in building business credibility among customers, suppliers, and global partners.
- Perpetual Existence: A Limited Company continues to exist regardless of changes in shareholders or directors. This legal continuity supports long-term business planning and growth.
Which one Should You Choose?
Select Private Limited Company if;
- You want to start a business with limited members and maintain control within a close group.
- You are a startup or small business seeking private investments or internal funding.
- You prefer lower compliance requirements and greater privacy in operations.
- You do not plan to raise funds from the public or list on the stock exchange.
- You want to protect your personal assets while running a closely held company.
Select Public Limited Company if;
- You aim to raise capital from the public by issuing shares.
- You want a stock exchange to list your business for greater market exposure.
- You are building a large-scale enterprise with high growth potential.
- You are comfortable with extensive regulatory compliance and public disclosures.
- You want to attract institutional investors and expand through public trust.
Conclusion
Choosing between a Private Limited Company and a Public Limited Company depends on your business goals, size, and funding needs. A Private Limited Company is ideal for startups and closely held businesses seeking privacy and simpler compliance, while a Limited Company suits large enterprises aiming to raise public capital and gain market visibility. Understanding these differences helps entrepreneurs make informed decisions for long-term success.
Suggested Read :
ROC Compliance Form For Pvt Ltd Company
Statutory Audit For Pvt Ltd Company
Enterprises vs Pvt Ltd Companies
Taxs & Compliances for Pvt Ltd Company
Advantages and Disadvantages Public Limited Company
FAQ
1. Can a Private Limited Company raise funds from the public?
No, a Private Limited Company cannot raise capital from the public, and its members privately hold the shares.
2. How many members are required at minimum to form a Limited Company?
A Limited Company requires a minimum of 7 members to be incorporated.
3. Can the public access the financial details of a Private Limited Company?
No, Private Limited Companies have fewer disclosure requirements, so their financials are generally private.
4. Can a Limited Company get listed on a stock exchange?
Yes, a Limited Company can be listed on recognized stock exchanges and raise funds from public investors.
5. Does a Private Limited Company offer limited liability to its shareholders?
Yes, shareholders in a Private Limited Company have limited liability, protecting their personal assets from business debts.
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