Explain The Difference Between A Private Limited Company And A Public Limited Company?

19 Answers

Anonymous Profile
Anonymous answered

The most important difference between a private limited company and a public limited company is that a public one may offer its shares to the public, whereas a private company doesn't.

Many small businesses operate as a private limited company. There are around 1.15 million private limited companies operating in the UK at the moment. First of all, a private limited company is owned by its shareholders. Your company and personal finances are kept separate under the limited company business structure. Limited companies are also subject to corporation tax on their profits.

And, if your company is going to turnover £73,000 a year (as of 1st April 2011, previously it was £70,000), then your company must register for value added tax (VAT). Unlike public limited companies, the shares of a private limited company are not traded on the stock exchange. This can restrict the availability of the company's finance, especially if they are looking to expand.

A public limited company is able to offer its shares to the public by trading on the Stock Exchange, meaning that the shares can be bought by general members of the public. This is the main difference between a public limited company and a private limited company however, public limited companies do not have to offer its shares to the public. A public limited company must have at least £50,000 worth of its shares issued in order for them to carry on the business. The money to fund these companies is provided by the government in the taxes that the public have to pay.

Other differences include that public limited companies are owned by the government, whereas private limited companies are private, of course. A private limited company is limited to fifty members but it must have no less than two and public limited company must have a minimum of seven shareholders, there is no maximum number.

Anonymous Profile
Anonymous answered
Incorporated Business

PRIVATE LIMITED COMPANy (LTD):
Differences:
• Private Firm
• Grown in the last 25 years
• objectives are mainly centred on  profit and growth
• Shares cannot be offered  to the general public, so restricting availability of finance, especially if the business wants to expand.
• Minimum of 7 shareholders – no maximum.
• Cannot raise money by selling shares on the stock market.

Similarities:
→   Limited Liability
→   Separate legal entity
→   Corporation tax is paid on profits
→   Finance raised through sale of shares
→   Financial information available to share holders, public and especially   Competitors.
→   Insolvency when unable to pay debts

PUBLIC LIMITED COMPANY (PLC):   →   (Health, Education, Police, etc)
Differences:
• Owned by the government.
• To trade they must have at least £50,000 worth of shares issued and at least 25% of them have to be paid up, in order for them to carry on business and borrow money from banks etc.
• Main objective is to provide a good service.
• Money is provided by the government through taxes that we pay.
• Limited to fifty members but no less that two.
• Can raise money by selling shares on the stock market.

I am studying this in my business studies class atm, and ive just done this as a starter for my homework (Y) hope its helps (:
Anonymous Profile
Anonymous answered
Even thought the information that Samarwfn produced is correct, it does not answer the specific question on hand and this may prove misleading. Samarwfn has made the mistake of commenting on the private and publics sectors rather than private and public limited companies. Both types of limited companies are in the private sector. Private limited companies can only sell there shares in private (hence the name) which is why they are usually owned within a family. Public limited companies, on the other hand, can advertise their shares freely so anyone can purchase them. However, they also have to publish documents regarding information such as their turnover.
Anonymous Profile
Anonymous answered
Ltd company is otherwise known as public limited company and pvt ltd company is a private limited company. Under public limited there are private sector company and public sector company.

The difference between pvt ltd and public ltd company is in the no. Of shareholders and transferability of shares. In pvt ltd the minimum no. Of shareholders is 2 and maximum is 50 excluding the past and present employees who holds shares . Whereas in public limited the minimum no. Of shareholders is 7 and there is no maximum limit.

In the case of public limited co., the shares are freely transferable but it is not so in private limited company.

Some of the strigent requirements which are applicable to public limited companies are not there in the case of private limited companies.

Public sector company is a company where the central govt or state govt or both of them combined together holds the majority of shares. But in Private sector companies the private individuals or business houses holds the majority of shares.

As far as I am concerned there is no significant difference regarding the benefits to be offered by a Private Ltd or Public Ltd Companies. Most of the benefits are reliant on the no. Of employees working in a concern.

Hope some of your doubts are cleared.

Thanking you

regards

Sandeep Yadav
Samar Fazlel Profile
Samar Fazlel answered
A private company runs the business for it's own profit. Whereas, a public company does not much care about profit as it is providing the goods or service for the public. If private companies does not make money then they will have to sell their possessive things to pay off the debts and whereas the public companies will not have to worry whether making profit or not because they are public companies so they are providing a service to the public. Private companies tends to be big. However, they are not so the are liable for their debts.
thanked the writer.
Anonymous
Anonymous commented
Are you crazy!!! YOU'VE PUT A WHOLE WRONG DEFINITION. Apublic limited simply means that the companies ownership can be bought or sold by the public it has nothing to do with the govtt!
Anonymous
Anonymous commented
Oh yaar u r totally wrong ..where is govt role in ltd co.


By Manojkumar007
Anonymous Profile
Anonymous answered
Its amazing how inaccurate some so called "answers" are.

Before I answer: With respect to capital, the difference between a company and sole trader or partnership is that the means of raising capital (besides financing from banks and other third parties) is that a company issues shares while a partnership or sole trader merely puts forth what is called a "contribution".

Now to answer the question at hand,

Public limited companies are those companies whose shares can be traded within an organised stock market. A stock market is merely a trading place in which shares of companies may be purchased or sold. So, imagine the situation in which the public limited company wishes to raise some finance. It can do this in one of two ways, or a combination of both. It can either go to the bank and ask for a loan (this is called debt financing) or it could look upon the market and sell claims on its own assets by issuing and allotting shares to the general public. By doing the latter, any one in the world can practically own part of the company and is entitled to a share of any profits which the company declares for distribution (these distributable profits are called dividends). In addition, shares represent an asset which is valued according to the future earnings of the company and may at any time be sold by its owner in the stock exchange.

Why would companies go public you say?

Equity financing, although slightly more expensive than debt financing does not carry any interest and profit distribution is at the discretion of management. But why will managers risk not satisfying their shareholders by giving them dividends? Easy, any money given out as dividends carries an opportunity cost. That money represents a leakage of funds from the company and hence the company can not invest it in wealth creating projects. That is the sole purpose of most companies. Management should always ask itself this: "What investing decisions can we take to enhance shareholder wealth and what is the best way in which to finance such activities?" We diverted a bit from topic and went into financing.

However, it is important you understand this basic principles to fully appreciate the difference  between public and private limited companies. But back on track:

On the other hand, those companies which do not decide to go public are said to be private which, although owned by shareholders, are usually held by fewer individuals than public companies and in most cases are owner-managed. Owner-managed is a term in which the owners (shareholders) of the company are also its managers. So although the management of public limited companies usually do hold a number of the company's shares,in most certainty it never hold the majority of shares. Hence, unlike private companies, public limited companies are usually characterised by a large disbursement of owners.

So till now we have the following distinctions:

1. Private companies usually characterised by a few shareholders which in most cases also represent management.
2. The shares of Public limited companies may be traded on the stock exchange
3. Public limited companies has a choice of financing options (lucky financial managers :))

Another distinction lies in regulation. Recent accounting scandals (Enron, Waste Management and WorldCom) led to a recognition of the deficiencies that existed within current regulation. As we said the shareholders of public limited companies usually are not involved in the day to day operations of the firm. One of the rights of the owners (shareholders) of any company is to be able to appoint representatives that will be charged with responsibility over the business operations. These are referred to as the Board of directors. One heated topic at the moment is that the board of directors are agents of the shareholders who have been trusted with the money of the shareholders and who should advertively act in the best interest of the shareholders. However, what keeps board of directors honest and in line with this basic agency principle? Thats right Regulation. Public limited companies  are by law required to have audit committees which are basically committees made up of non-executive directors (directors who are not dependent on the company for their livelihood) which serve as an independent oversight committee over the affairs of the directors and their practices. In addition, Enron bust led to the  Sarbanes-Oxley Act which was enacted to enhance standards for all US public limited company directors, management and public accounting firms.

Understand, public limited companies have a much bigger impact on the public at large if something goes wrong because, as we said, they often consist of millions of shareholders who all have a stake if the company goes bust.

So No. 4 is : Public limited companies are much more heavily regulated due to the fact that they have a bigger affect on society at whole.
Anonymous Profile
Anonymous answered
Shares in a private limited company are sold to friends, as it says " private" while public limited company sells its shares to the general public via the stock exchange.
In the private limited company, the major shareholders are in the board of directors while in the public limited company the directors and managers are not shareholders.
A private limited company has an abbreviation of :- P.t.y. L.T.D or Limited
while a public limited company has an abbreviation of:- P.l.c or ( limited in some countries)
Anonymous Profile
Anonymous answered
A private limited company has a minimum number of 2 shareholders and maximum of 50 while a public limited company has a minimum of 7 and has a maximum of infinity number of shareholders.
Sana Rashid Profile
Sana Rashid answered
Both private limited and public limited companies are part of the private sector of the economy. Although both the types of companies raise capital through selling shares, a private limited company cannot quote its shares on the stock exchange while a public limited company can. A pvt. Ltd. Company can sell its shares to friends and family and reselling of shares only takes place once all the shareholders agree. For a plc, the shares can be bought or sold through the stock exchange without consulting other owners.
Also there are more legal requirements to be fulfilled  for the formation of a plc as compared to the formation of a pvt. Ltd. Company such as the issuance of a prospectus.
Ramona  Vandusen Profile
Ramona Vandusen answered

A private limited corporation is one that is owned privately by a group
of private individuals. A limited corporation is a public limited corporation
that is owned by the general public.

All the shares of a private limited corporation rest only in the hands
of a few people or promoters. Most of the shareholders in a private limited corporation
will consist of very close groups of relatives or friends. On the other hand,
the shareholders in a limited corporation are the public.


sasmita Dsc Profile
sasmita Dsc answered

Private Limited Company

Private limited company is something
that is closely held . Like you cannot advertise your offer to subscription
shares in newspapers. You will have to sell the shares personally to your
family members or someone who is going to fund capital for you .
You need minimum 2 members , 2 directors and minimum paid up
capital of 1lakh .
There is considerable less restrictions on private company
than on public company (it is not that significant)
You cannot sell shares in share market , you have to sell it
back to the company (if the company buy backs) or you can sell it to some other
member (with permission ) or some outsider (with permission )

Public Limited Company

Public limited on other hand
Requires 7 members
Minimum paid up capital of 5 lakh.
Shares can be offered to public by sending prospectus.
They can be sold to anyone by just making an application.
They can be sold on stock exchange market only if the company
is listed
If the company is listed then you have to follow guidelines
by SEBI (Securities Exchange Board of India)

Minimum No. Of
shareholders:

Private Company: 2

Public Company: 3

Ceiling limit on Number of
Shareholder:

Private Company: 200

Public Company: No limit
provided

Transferability of shares:

Easier in case of Public
Company as many restriction are laid in Private Company.

Minimum Number of
Directors:

Private Company: 2

Public Company: 3

Issue of shares/securities
to public:

Private Company: Prohibited

Public Company: Allowed
subject to following provisions

Suffix:

Private Company: Private
Limited Company

Public Company: Public
Limited Company

Before choosing
the type of Company, one shall consult a professional who can guide you on the
basis of requirements of business and activities to be carried on.

You may contact Greenleaf for any further clarification and
Incorporation of the Company. To make the process simple, affordable and
hassle-free, please contact us at 9962071988 for
consultation with experienced professionals.

Anonymous Profile
Anonymous answered
They are both limited companies
they raise their money by selling shares
the companies are incorporated
the companies shareholder's have limited liability
Anonymous Profile
Anonymous answered
Private company has less than 50 shareholders and public company has minimum 7 shareholders and has no upper limited
Anonymous Profile
Anonymous answered
Private company can only sell there share in private and public company on other hand can advertise their shares freely so anyone can purchase them.
Anonymous Profile
Anonymous answered
A private and public limited company both belong to the Private sector i.e both have the aim of making profits. The Private limited company cannot advertise its products or sell its shares to the public and is meant to be a small business, one that a family may take over selling shares to brothers and sisters whereas a Public Limited Company is the exact opposite. In this you can sell your shares to the public and advertise your products on T.V, radio channels,magazines and so on, but the draw back is if you sell too many shares and if another person buys most of your shares, he will become the new head of that company even if you built it.Sometimes people find it difficult to manage such large businesses of Public Limited Companies and prefer to become sole traders or start a PVT co.   To tell you the truth I was suppose to get this info and give it in as a project but in the end I had to type it myself and give it...
Anonymous Profile
Anonymous answered
In the PLC the shares can be bought by the general public while in th Private Limited Company the shares cannot be freely bought. Another difference is that the shares are listed in the stock exchange in the PLC but in the private company they cannot.
Anonymous Profile
Anonymous answered
A public company is a company limited by shares which must have atleast 2 members and capital of not less than $40,000, so public company can offer their shares to the public
while private company is a limited company with at least 2 members which is not a public company so private can not offer shares to the public.
Anonymous Profile
Anonymous answered
Some of the stringent requirements which are applicable to public limited companies are not there in the case of private limited companies.

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