In the world of business, various business structures are available for companies. They are mainly public limited companies and private limited companies.
As we know, India has a diverse marketplace, so the nature of the business and the structure of the companies totally depends on its characteristics and requirements.
Understanding the public limited company vs. private limited company is one of the crucial steps if you are starting your own business in India.
Let’s explore how these two business structures differ and which one might be the right fit for your business journey.
What is Public Limited Company?
A private limited company is one of the popular business structures in India. It is privately held and owned by small groups of directors and shareholders and can be registered under the Companies Act, 2013.
For a detailed guide on private limited company rules and regulations, follow our comprehensive guide to ensure compliance and smooth business operations.
What is a Pvt Ltd Company?
A Public Limited Company is a type of business structure that offers its shares to the general public and is listed on a stock exchange. These shares can be easily bought and sold by the public through the stock exchange.
It requires at least 7 members and there is no limit on the maximum number of shareholders. It is registered under the Companies Act, 2013 in India and is subject to strict regulations by the Securities and Exchange Board of India (SEBI) to ensure transparency and accountability.
Difference Between Private Company and Public Company
Feature | Public Limited Company | Private Limited Company |
Ownership | Owned by shareholders; shares are publicly traded. | Owned by a small group of individuals, family, or private investors. |
Share Transferability | Shares can be freely bought and sold on the stock exchange. | Shares are restricted and require shareholder approval for transfer. |
Capital Raising | Can raise capital from the public by issuing shares via IPO. | Can only raise funds through private investments, loans, or venture capital. |
Regulatory Compliance | Stricter regulations under SEBI and the Companies Act, 2013. | Fewer compliance requirements, governed only by the Companies Act, 2013. |
Minimum & Maximum Members | Minimum 7 members, no maximum limit. | Minimum 2 members, maximum 200. |
Board of Directors | Minimum 3 directors required. | Minimum 2 directors required. |
Financial Disclosure | Must publish financial statements and annual reports publicly. | Financial statements remain private and confidential. |
Risk and Liability | Higher risk due to stock market fluctuations and shareholder expectations. | Lower risk, as ownership is limited and more controlled. |
Decision-Making | Slower, as decisions require approval from multiple shareholders and regulatory bodies. | Faster, as decisions are made by a small group of owners. |
Profit Distribution | Profits are distributed as dividends to all shareholders. | Profits are shared among a small group of owners based on agreement. |
What to choose between public limited company vs. private limited company?
Choosing between a private limited company vs. a public limited company depends on the nature, goals, and scale of your business. A public limited company is ideal for large-scale businesses looking to grow through public investments. However, it has strict regulatory requirements and shareholder obligations.
On the other hand, a private limited company offers flexibility, confidentiality, and ease of management, making it an ideal choice for startups and small to medium-sized businesses looking for controlled ownership.
Ultimately, the decision hinges on your business objectives. If you’re looking for a trustworthy partner for your private limited company registration, Maalik Bano is one of the best choices. Let us handle all the legal activities for you, so you can focus on growing your business without any hassle.
