What is the difference between Private Company and Public Company?

Basically, there are two types of company. Either a Private Company or a Public Company. The status of a company can be decided by its ownership. When a company is owned by a private individual or group of persons and there is no involvement of the general public in contributing capital then this company is known as a private company. It cannot raise funds from Public to grow or operate its business by issuing shares or debentures. 


But a Public Company can raise funds from public to grow, expand or operate its business in the form of shares, debentures, bonds and so on. And this is the main difference between Private Company and Public Company. A Public company can be a government company or a non-government company. The thing which we look in on deciding whether a public company is a government or non-government is its ownership. When the total shareholding of any Public Company is equal to or more than 51% owned by the government, then that company is said to be a Public Sector Undertaking or a Government Company. 

Now, Let us discuss the difference between Private Company and Public Company:-

PRIVATE COMPANY

A Private Company is a company which:

• restricts the right of members to transfer its shares
• has a minimum of 2 and a maximum of 50 members, excluding the present and past employees,
• does not invite the public to subscribe to its share capital,
• must have a minimum paid-up capital of Rs 1 lakh or such higher amount which may be prescribed from time to time. 

For a Private Company, it is necessary to use the word PRIVATE LIMITED or PVT LTD with its name. If a private company contravenes any of the aforesaid provisions, it ceases to be a private company and losses all the exemptions and privileges to which it is entitled. The following are the features of a private limited company:

• A private company can be formed by only two members whereas seven people are needed to form a public company.
• There is no need to issue a prospectus regarding share capital because the public is not invited to subscribe shares.
• There is no minimum subscription provision.
• It can start its business as soon as it gets Certificate of Incorporation.
• A private company needs to have only two directors. 
• A private company is not required to keep an index of members.
• There is no restriction on the amount of loan to directors in a private company. 

PUBLIC COMPANY 

A Public Company is a Company which is not a Private Company. According to Indian Companies Act, a Public Company is one which:

• has a minimum paid-up capital of Rs 5 lakhs or higher amount which may be prescribed from time to time.
• has a minimum of seven members and there is no maximum limit of members. 
• has no restriction of shares.
• It can invite public to subscribe its shares.
• Public Company should have a minimum of 3 directors. 
• It is required to keep an index of its members. 
• For granting the loan, permission is needed from the government. 
• To start operating business, Certificate of Commencement must be needed.

 Read Formation of a Company