In a Private Limited company, the minimum number of shareholders should be two and have a maximum number of 50 shareholders. A company becomes an independent legal entity when incorporated with the Registrar of Companies under the Companies Act 2013.

A significant difference between a Private Limited Company and an LLP is that Private limited companies are flexible concerning business owners because the shares can be easily transferred, unlike LLP. In a Private Limited Company, the shareholders do not participate in the management of the business as the shareholders and the company management are distinguished. Under the LLP format, there is no clear distinction between the owners and the company management. In LLP, the partners hold the ownership of the company along with the power to manage it.

The shareholders of a Private Limited company can transfer their shares to another person only with the consent of other shareholders.

Public Limited Company

In a public Limited company, the minimum number of shareholders is seven, and there is no upper limit to the number of shareholders. A group of promoters owns a Private Limited Company. A Public Limited company is not in the hands of its promoter shareholders, but with the public that owns it.

The shares of a Public Limited Company can be bought and sold (traded) on a stock exchange by anyone. The regulations concerning Public companies are stringent. And the law requires them to publish their accurate financial position to give the investors a good idea about the actual worth of their stock (shares).

The word ‘Limited’ in the company name shows that the liability of the Shareholders is limited. And they can potentially lose only the amount they have paid for the shares they own.

The shareholders are the real owners of the company, and Directors who are appointed by the shareholders to manage the company is responsible for running the business and accountable to the shareholders.

The main advantages of being a public limited company are:

a) The company has better access to capital as it can raise share capital from existing and new investors.

b) If the shares get quoted on a stock exchange, the shareholders can easily buy and sell their shares. The liquidity, or the ability to sell the shares, helps the investor to discover the value of the shares they own at any given time.