Difference Between Private Limited Company And Public Limited Company

24 Mar,2024

Private and public limited companies constitute the two broad categories of businesses in the corporate world. The law recognises both as legal entities; however, their structures, ownerships, and operations differ significantly. Thus, comprehending these key distinctions between company types is imperative for entrepreneurs, investors, and stakeholders alike. So, what is the importance of knowing the difference between private and public limited companies? Private and public limited companies significantly differ in their legal and regulatory requirements. Understanding these distinctions proves crucial to guaranteeing compliance with pertinent laws, regulations, and corporate governance norms; neglecting this duty may result in penalties, legal disputes, and even reputational harm.

Distinguishing between private and public limited companies' ownership structures and control mechanisms is imperative. Typically, a smaller group of shareholders concentrates ownership in a private limited company; however, it is widely dispersed among numerous stakeholders in a public limited company. To make informed decisions, one must comprehend these differences deeply.

What is a public company?

In contrast, the Companies Act defines a public company as any joint-stock entity lacking private company status. Such public companies must meet certain criteria; notably, they require a higher minimum paid-up capital of Rs. 5,00,000, and membership should be at least seven. The characteristics of a public company differ greatly from those of private companies.

Unlike public companies, private entities face restrictions on their maximum membership numbers. The Securities and Exchange Board of India (SEBI) controls the listing and trading procedures for these company's shares on stock exchanges; moreover, all public corporations must incorporate the term "Public Limited" into their official names. Understanding the nature of private and public companies allows us to explore the difference between private and public limited companies.

Difference between private and public limited liabilities company

Indeed, let us explore the key distinctions between these two company types: private limited companies and public limited companies in India. The Companies Act of 2013 regulates both these differing entities, from their formation to ownership structure, compliance requirements, and fundraising opportunities, among other things. This highlights yet another facet of India's dynamic corporate landscape.

Ownership structure and transferability of shares

For private limited companies, a minimum of two members or shareholders is mandatory; the cap on this number is 200. Potential shares held by past and present employees do not factor into this limit.

The ownership structure remains closely held; therefore, transferring shares carries strict restrictions that often necessitate consent from other associates. Due to this limited transferability of shares, private limited companies experience reduced liquidity and marketability.

Conversely, public limited companies must have a minimum of seven members or shareholders; however, there is no maximum membership limit. The high liquidity and marketability of shares in these entities allow for free exchange on stock markets. SEBI sets the regulations governing share transfers within public limited companies.

Capital requirements and fundraising opportunities

In India, private limited companies must maintain a minimum paid-up capital of Rs.1,00,000; however, their options for capital generation remain restricted. They predominantly depend on private investors or bank loans. They cannot issue shares or debentures to the public. Contrarily, public limited companies must possess a minimum paid-up capital of Rs. 5,00,000; furthermore, they enjoy access to an extensive array of fundraising opportunities. This includes the capability to raise capital via public offerings, either shares or debentures. Through this access to capital markets, public limited companies can tap into a vast pool of investors, thus potentially fuelling their growth and expansion. You can also consult the difference between private and public limited company PDFs for future trends in India's company formation rules.

Compliance and regulatory requirements

Private limited companies in India experience less stringent compliance and reporting requirements than their public counterparts. They undergo fewer statutory filings and disclosures, thereby achieving lower compliance costs. The regulatory burden on these private limited companies diminishes significantly, empowering them to operate flexibly. On the other hand, publicly traded companies face stricter compliance and reporting requirements. Extensive regulations mandate their adherence, compelling them to make mandatory disclosures and filings with regulatory bodies like SEBI and the Registrar of Companies. While this amplified level of compliance incurs higher costs, it also guarantees superior transparency and accountability for public investors.

Name Distinction and Exit Options

Private limited companies must incorporate the terms "Private Limited" or "Pvt. Ltd." in their name to communicate their status to stakeholders. Shareholders of these companies usually face restricted exit options, including buybacks or private sales.

Conversely, public limited companies require the inclusion of "Limited" or "Ltd." within their name. Shareholders in these entities experience broader exit strategies and can sell their shares on stock exchanges. This move could potentially yield increased returns via public listings and acquisitions.


Various factors, including the scale of operations, capital requirements, ownership structure and growth aspirations, dictate the significant decision between private and public limited companies. Private entities offer more control and flexibility but have limited access to capital markets.

In contrast, public corporations must contend with extensive regulations and compliance requirements while providing access to broader capital sources. Understanding the difference between a public limited and a private limited company in India is your first step toward company formation.

Visit https://adca.in/ to learn about the nuances of company formation in India.


What are the characteristics of private limited companies?

  • - Members: 2 minimum, 200 maximum.

  • - Directors: 2 minimum, 15 maximum.

  • - Liability: Limited for shareholders.

  • - Succession: Perpetual.

  • - Share Capital: Authorized Rs. 1 lakh; no minimum paid-up capital.

  • - Name: Must include 'private limited'.

  • - Prospectus: Not issued; cannot invite public.

  • - Index of Members: Not required.

What are the advantages of private ltd companies?

The advantages of Private limited include less stringent compliance requirements, greater operational flexibility, and enhanced control over ownership and management.

What are the characteristics of public limited companies?

No maximum member limit constrains public companies; their shares can be freely transferable, and they are obligated to include "Limited" in their name.

How to identify if a company is a private limited or public limited immediately?

The public limited company vs private limited company India can easily allow you to identify the company type. However, the company's name will give you a clear insight into the company type. "Private Limited" indicates a private company; however, "Limited" denotes a public company.

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