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Differences between Private and Public Limited Companies

 

We discussed companies in great detail in the previous blog. If you are coming straight here but would like to get to know what being a company actually entails then you can go back, read that one first and then come here.

If you have been reading the full series, let’s crack on.

The following table states the main differences between private and public limited companies. And then at the end, we have also given a summary.

Some clarifications:

1. SEC stands for Securities and Exchange Commission, it is a government body.
2. There is a point mentioned above about information disclosure, since the partners are all on the inside and a private company is not required to Securities and Exchange Commission, they are not required to disclose any information.

Also, since there is not a large number of shareholders in the company, the owners are not answerable to anyone.

Summary:

Public limited companies are a much bigger venture than private limited companies. To start a Public Limited Company one has to have sufficient amount of capital and public interest on their side to see it through. This kind of a venture requires legal check and proceedings at every step as the public is involved. This also means that the company needs public interest to be able to raise sufficient capital.

Private limited companies involve a lot less legal accountability and checks. The partners have more room to run their business as they please and take all important decisions themselves. They are also not accountable to shareholders so their profits and losses come with a lot less pressure. However, this freedom means that they only have as much capital and hence liquidity as the partners can generate among them. They can’t have unlimited amounts pouring in.

We hope we were able to explain the various business structures comprehensively and you now know a bit more than you did.

Please let us know if there is any topic that has gone uncovered and which you would like us to take up. We would be glad to help!

  We discussed companies in great detail in the previous blog. If you are coming straight here but would like …

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