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Summary Private and Public limited Companies.
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Difference between private and public limited companies with clear definition and examples. Explained clearly . Score A1 easily.
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PRIVATE AND PUBLIC LIMITED COMPANIES1. PRIVATE LIMITED COMPANY
A private limited company, or LTD, is a type of privately held small business entity.
This type of business entity limits owner liability to their shares, limits the number of
shareholders to 50, and restricts shareholders from publicly trading shares.
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Features
Members– To start a company, a minimum number of 2 members are required
and a maximum number of 200 members as per the provisions of the companies
act 2013.
Limited Liability– The liability of each member or shareholders is limited. It
means that if a company faces loss under any circumstances then its shareholders
are liable to sell their own assets for payment. The personal, individual assets of
the shareholders are not at risk.
Perpetual succession– The Company keeps on existing in the eyes of law even in
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, the case of death, insolvency, the bankruptcy of any of its members. This leads to
the perpetual succession of the company. The life of the company keeps on
existing forever.
Index of members– A private company has a privilege over the public company
as they don’t have to keep an index of its members whereas the public company is
required to maintain an index of its members.
A number of directors– When it comes to directors a private company needs to
have only two directors. With the existence of 2 directors, a private company can
come into operations.
Paid up capital– It must have a minimum paid-up capital of Rs 1 lakh or such
higher amount which may be prescribed from time to time.
Prospectus– Prospectus is a detailed statement of the company affairs which is
issued by a company for its public. However, in the case of a private limited
company, there is no such need to issue a prospectus because in this public is not
invited to subscribe for the shares of the company.
Minimum subscription– It is the amount received by the company which is 90%
of the shares issued within a certain period of time. If the company is not able to
receive 90% of the amount then they cannot commence further business. In the
case of a private limited company, shares can be allotted to the public without
receiving the minimum subscription.
Name– It is mandatory for all the private companies to use the word private
limited after its name.
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