Difference Between Private and Public Company

Understanding the difference in ownership, regulations, types, and more between private and public company.
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3 min
03 October 2025

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.

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.

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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.


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.

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Frequently asked questions

What are the main differences between public company and private company?
The key differences between public and private companies primarily revolve around ownership, financial disclosure, and shareholder regulations:

1. Ownership and Share Trading: Public companies can sell shares to the public through the stock market, allowing for a broader ownership base. Private companies are restricted to a maximum of 200 shareholders, and their shares are not available for public trading.

2. Regulatory Requirements: Public companies face stringent regulatory requirements, including detailed financial reporting and compliance as mandated by securities regulators to protect public investors. Private companies have less onerous regulatory obligations and require fewer disclosures, making them simpler to manage.

3. Capital Raising: Public companies can raise significant capital by issuing shares and bonds to the public, which can be beneficial for expansion and large-scale operations. Private companies typically rely on investments from owners, loans, and venture capital, limiting their ability to raise large amounts of capital quickly.

4. Management and Decision-Making: Public companies often have a more complex structure with a board of directors, committees, and various officers, all governed by public and regulatory scrutiny. This can slow decision-making processes. Private companies usually enjoy quicker decision-making due to fewer formalities and less scrutiny.

Is it better to have a private or public company?
Whether it is better to have a private or public company depends on the business goals, size, need for capital, and the owners' willingness to deal with regulatory complexities and public scrutiny. Private companies are better for those seeking less regulatory burden and greater control over business decisions, while public companies are suitable for businesses looking to raise substantial capital, enhance their market credibility, and have no issue with public transparency and complex corporate governance.

What is meant by a private company?
A private company, often known as a private limited company, is a type of business entity held privately by a small group of people. It is characterised by its inability to publicly trade shares and is limited to a maximum of 200 shareholders. The company restricts the right to transfer its shares among its members, offering more privacy and control to the owners. Private companies are preferred by small to medium-sized enterprises that desire operational flexibility, limited liability, and minimal public disclosure requirements.

What is meant by public company?
A public company, also known as a publicly traded company, refers to a company that has issued securities through an initial public offering (IPO) and is traded on at least one stock exchange. This type of company is subject to significant regulatory oversight and must disclose detailed financial information regularly to protect public investors. Public companies can have an unlimited number of shareholders, and their shares are freely tradable, providing greater liquidity and access to capital.

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