There are two types of organizations that are 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.
Key Takeaways
- Public Companies sell shares to the general public, while Private Companies have few shareholders.
- Government authorities regulate Public Companies, while Private Companies are not.
- Public companies must disclose financial information to the public, while Private Companies have more privacy in their financial dealings.
Public Company vs Private Company
A public company is a type of business organization that has issued shares of stocks that can be bought and sold by the public on a stock exchange. These companies are owned by shareholders who have limited liability. A private company is a type of business organization that is owned by a small group of people, such as founders, family members, or private investors.
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 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 is a group of people privately investing in the organization’s management and running a private company.
Comparison Table
| 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 smaller when compared to a public company. |
| Size | The size of the organization is significantly large. | The size of the organization is comparatively smaller or depends on the privately held groups. |
What is Public Company?
A publicly held organization is a public company that has the privilege to invite the general public to subscribe 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 large and should have a least seven people in the management in a public company hierarchy. There are about three directors, unlike the private sector that have two members as directors in a public company.
Public companies do not hold any restrictions 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 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 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 is 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 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 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 three in a public company.
- Venture capital is larger in public companies and smaller in private companies.
Last Updated : 17 August, 2023
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Chara Yadav holds MBA in Finance. Her goal is to simplify finance-related topics. She has worked in finance for about 25 years. She has held multiple finance and banking classes for business schools and communities. Read more at her bio page.
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