What is the maximum limit on members of a private and public company?

A public limited company requires a minimum of 7 members to be formed, with no upper limit on the maximum number of members. In contrast, a private limited company must have at least 2 members, and the total number of members cannot exceed 200.

What are the features of public and private companies?

Private companies are easier to establish and face fewer regulatory obligations, making them ideal for startups and businesses with foreign ownership. In comparison, public companies, which can raise funds from the general public, are better suited for large-scale projects that need substantial investment.

Difference between private and public companies under the Companies Act, 2013?

Under the Companies Act, 2013, a private company restricts share transfer, limits members to 200, and cannot invite the public to subscribe to its shares. A public company allows free transfer of shares, can raise funds from the public, and is subject to stricter compliance and disclosure requirements.

Why choose between forming a private and public company today?

The choice depends on business scale, funding needs, and regulatory readiness. A private company suits smaller or closely held businesses seeking control and flexibility. A public company is preferable for large enterprises aiming to raise capital from the public and expand significantly, despite higher compliance obligations.

Is a private or public company more transparent?

A public company is generally more transparent due to mandatory disclosures, regulatory filings, and scrutiny by investors and authorities. Private companies have fewer disclosure requirements and greater confidentiality. However, this also means reduced public accountability compared to public companies operating under stricter regulatory oversight.

Difference between private and public company

3 min

April 23, 2026

A private company is a business entity owned by a small group of investors or shareholders and does not trade its shares publicly. Conversely, a public company offers its shares to the general public through a stock exchange, allowing for broader ownership and typically greater access to capital. Let’s delve deeper into the differences between these two types of companies.

What is a Public Limited Company?

A public limited company is a type of business entity that is allowed to offer its shares to the public. Governed under the Companies Act, 2013 in India, this form of company must have a minimum of three directors and seven shareholders, with no upper limit on the number of shareholders. Public limited companies must also maintain a minimum paid-up capital of INR 5 lakhs or such higher amount as prescribed. The shares of a public limited company can be traded on a stock exchange and bought by the general public. The process of converting private company to public limited company can be complex and requires strict adherence to regulatory guidelines. This structure is favored by businesses seeking to raise capital from the public through the sale of shares. Key features include greater transparency, strict regulatory compliances, and increased public scrutiny, which often enhances credibility and opportunities for growth.

Public companies are required to register with and submit company information to the Securities and Exchange Commission (SEC) as part of its mandate to protect investors, maintain fair, orderly and efficient markets, and facilitate access to capital for companies and entrepreneurs.

What is a Private Limited Company?

A private limited company is a type of business entity held privately by small groups of people. It is registered for pre-defined objects and owned by a group of stakeholders known as shareholders. Under the Companies Act, 2013, a private limited company must have a minimum of two directors and can have a maximum of two hundred shareholders. The company restricts the right to transfer its shares between its shareholders and does not allow public trading of shares. Typically, private limited companies are favored for small to medium-sized businesses due to their operational flexibility, limited liability of the members, fewer compliance burdens compared to public limited companies, and substantial control over the business.

It is often said that private companies aim to minimise their tax burden, while public companies focus on maximising profits for their shareholders.

Key takeaways

Private companies are typically owned by founders and private investors.
A public company offers its shares to the public through an initial public offering (IPO).
Public companies can raise capital by issuing shares and bonds.
Private companies generally focus on minimising tax liabilities, whereas public companies aim to maximise returns for shareholders.
Public companies are required to file information with the Securities and Exchange Commission (SEC) to ensure investor protection.

Difference between Private and Public Company

Private and public companies are different in many ways. The table below shows the main differences between them:

Basis

Public Company

Private Company

Meaning

Listed on the stock exchange; anyone can buy or sell its shares.

Not listed on the stock exchange; shares are owned privately.

Number of Members

Minimum 7 members; no maximum limit.

Minimum 2 and maximum 200 members.

Articles of Association

Can make its own rules or follow the standard format (Schedule F).

Must create its own Articles of Association (company rules).

Transfer of Shares

Shares can be freely bought or sold on the stock exchange.

Share transfers are restricted, as per company rules.

Public Subscriptions

Can invite the public to buy shares or bonds.

Not allowed to offer shares or bonds to the public.

Issuing a Prospectus

Can issue a prospectus or choose private placement.

Not allowed to issue a prospectus.

Minimum Allotment Amount

Must get a minimum number of subscriptions before issuing shares.

Can issue shares without meeting a minimum subscription.

Starting a Business

Needs a certificate of commencement to start business.

Can start business as soon as it is registered.

Appointment of Directors

One director can be appointed by one resolution.

Two or more directors can be appointed with one resolution.

Statutory Meeting

Compulsory.

Not compulsory.

Suffix in Name

Must have “Limited” at the end of the company name.

Must have “Private Limited” at the end of the company name.

Disclosing Reports

Must share quarterly and yearly financial reports with the public.

Not required to publicly share financial results.

Examples of public and private company

Examples of public companies:

Large listed information technology firms providing software, consulting and digital services.

Major pharmaceutical manufacturers producing medicines at global scale.

Large banking institutions listed on stock exchanges offering retail and corporate financial services.

Examples of private companies:

Private logistics firms providing courier and parcel delivery services.

Technology companies offering internet-based services without public shareholding.

Family-owned manufacturing or trading businesses operating without listing on stock exchanges.

Advantages and disadvantages of private and public companies

Company Type

Advantages

Disadvantages

Private

Offers greater control and privacy, simpler compliance requirements, faster decision-making, and confidentiality of financial information.

Limited access to capital, lower liquidity for investors’ shares, and potential constraints on growth.

Public

Provides access to larger pools of capital, improved credibility and market visibility, higher liquidity for shareholders, and the ability to attract top talent through stock options.

Reduced control for founders, heavier regulatory and compliance obligations, greater public scrutiny, and exposure to market volatility.

Is it possible for a private company to go public?

Yes, a private company can be converted into a public company through a legal procedure. This involves obtaining shareholder approval via a special resolution and submitting the required documents to the relevant authorities. The company’s Memorandum and Articles of Association must be amended to remove restrictions on share transfer and delete the word “Private” from its name. Companies usually opt for this conversion to raise funds from the public, enhance market presence, and boost credibility.

Conclusion

Understanding the distinction between a public limited company and a private limited company is crucial for entrepreneurs and business owners to choose the most appropriate structure based on their capital needs, business scale, and management styles. While a public limited company offers the advantage of raising funds from the public and ensures greater transparency, a private limited company offers simplicity and less stringent regulatory controls, making it suitable for smaller operations. Businesses must also account for company registration fees in India when selecting their entity type. Both entities provide limited liability protection, but the choice depends significantly on the company's vision for growth, the need for capital, and the desired level of regulatory oversight. Entrepreneurs considering expansion may start as private limited companies and transition to public as they grow and require more capital, potentially facilitated through business loans and public investment. Ultimately, the decision should align with long-term business goals and operational capacities.

How to get Business Loan for Public or Private Limited Company

Understanding how much money the company needs and deciding the right loan amount.

Checking the company’s financial records, such as profit and loss statements, balance sheets, and cash flow reports.

Preparing a list of important documents needed for the loan application, like company registration papers, tax returns, and bank statements.

Explaining why each document is important and how it helps in getting the loan approved.

Helpful resources and tips for business loan borrowers

Types of business loan	Business Loan Interest Rates	Business Loan Eligibility
Business Loan EMI Calculator	Unsecured Business Loan	How to Apply for Business Loan
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Machinery Loan	Personal Loan for Self Employed	Commercial Loan

Difference Between Private and Public Company

What is a Public Limited Company?

What is a Private Limited Company?

Key takeaways