There are two types of organizations that is the public and private sector-based institutions. When the organizational shares are made public and sold to the public to keep the public as one of the stockholders, then it is listed under the public sector and then called a public company. In contrast, a private company is dealt with by an individual or private organizational member team.
Public Company vs Private Company
The main difference between the public and private company is that the people involved in the organization varies with both cases. A public company will involve the general public, whereas a private company will involve individuals in an organization/ company or a set of people involved in the functioning of the organization.
A public company is an organization where the business involves the public, in general, to share the stocks of the company and exchange them among them. A public company is also called a public corporation. It is generally held by the public that owns the shares or stocks of the respective organization.
A private company is an organization wherein the management and shares involve a set of individual members that hold the responsibility of the company. These individuals are people who belong to the company’s administration, founders, and a set of private capitalists. This set of capitalists are a group of people privately investing in the organization’s management and running in a private company.
Comparison Table Between Public and Private Company
| Parameters of Comparison | Public Company | Private Company |
| Shareholders | The shares are owned by the general public. | The shares are owned by private investors. |
| Number of Members | Since it is a publicly held organization, public companies do not have a set range for a number of members. | Private companies only have a finite number of members in their organizations. |
| Number of Directors | The minimum number of directors is three in a public company. | The minimum number of directors is two in a public company. |
| Capital | The capital, in general, is higher than that of a privately held company. | The minimum capital is usually smaller when compared to a public company. |
| Size | The size of the organization is usually significantly large. | The size of the organization is comparatively smaller or depends on the privately held groups. |
What is Public Company?
A public held organization is a public company that has the privilege to invite the general public for subscription and share the stocks of the company. Public companies, in general, do not hold a restriction in terms of any share transfer or exchange.
The size of the organization that is held by the general public is usually large and should have a least of seven people in the management in a public company hierarchy. There are about three directors, unlike private sectors that have two members as directors in a public company.
Public companies do not hold any restriction on the upper limit of the members in the organization. The company, since held by the public, utilizes the word limited in order to represent the company. This term is used at the end of the name of the company held by the public.
The share prospectus is updated in a timely manner by the public company management for the public to fetch the share and own a part of the organization. The funds for the company is often praised for the smooth functioning of the company, and it is also quite flexible and easier to raise the required amount of fund since the public owns a share of the market and the required funds for the company is produced.
What is Private Company?
A private company is usually held by a set of administrators or individuals who look after the functioning of the organization. The shares are also limited to the private group that owns the company, and it does not belong to the common people or the general public.
Private sector-based companies possess one or two owning persons who are the directors of the company, and they take care of the company. The shares are not provided to the public, so the shares prospectus are not prepared or provided to the public people.
The term private limited is used at the end of the company name to address a private company. The company also faces struggles in raising funds for itself. Since the owning body is single-handed, the management will not be able to split the shares of the company to the public.
The share capital of the private company comes under the ownership of the company. Moreover, there is no restriction in terms of reporting beneficial ownership requirements. The investment of the private company is also comparatively smaller when compared to those of the publicly held companies.
Main Differences Between Public and Private Company
- The size of the public organization is comparatively larger than that of a private company.
- The number of people and the capital sum is usually larger in a public company, whereas the number of people and the capital sum is small in a private company.
- The shares of the company are owned by the general public in a public company, whereas the shares are privately held in a private company.
- The number of directors differs in both private and public companies. It is usually three in a public company.
- The venture capital is usually larger in public companies and smaller in a private companies.
Conclusion
Both public and private companies have differences in functioning and share prospectus provision as an overall. The minimum capital requirement is larger in the public company, whereas it is smaller in a private company that is being held by a private group or individual. The minimum number of directors is more in a public company and it only two in a private company.
The suffix in the name serves as an identification tag to know if a company is held by the public or private sector. The share transfers also take place only in a public company, and it isn’t restricted like in a private company.
References
- https://www.jstor.org/stable/117434
- https://www.uwb.edu/getattachment/business/about/research-series/implications-for-future-profitability-april-2015.pdf