Difference Between Limited Company and Private Limited Company

Edited by Diffzy | Updated on: September 24, 2022

       

Difference Between Limited Company and Private Limited Company Difference Between Limited Company and Private Limited Company

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Introduction

A company is defined as an organization or a legal body created by a group of persons to establish and manage a business. The formation of a corporation is governed by the corporate laws of the jurisdiction in which it is formed. A company may be organized as a partnership or as a sole proprietorship, depending on the structure that has been established, or it may be argued that the business line of a company is determined by the structure of the firm.

When it comes to the business sector, the acronym "PVT. LTD. company" and "LTD. company" are both well-known and used. "PVT. LTD. company" denotes a "private, limited liability company," while "LTD. company" denotes a "public, limited liability corporation." From the name, it would seem that both types of businesses would have limited obligations in the event of a financial crisis inside the organization, such as bankruptcy. The fundamental distinction between the two is the kind of limited liability business. It also serves as a prelude to the other changes to come.

LTD vs Pvt LTD Companies

The main difference between an Ltd company and a Private Limited or Pvt Ltd company is that in a Limited or Ltd company, all shareholders have access to the company's shares; in a Private Limited or Pvt Ltd, all shareholders have exclusive access to the company's shares; and it is governed by private promoters or a group of promoters.

Because the private, limited business consists of individuals who are intimately linked to one another, the shares held by the firm are likewise private and may only be transferred among the shareholders. Shares cannot be transferred without the consent of another shareholder, and they cannot be kept in a public media such as a stock market, for example.

Transactions inside the private, limited business are not made available to the general public, and no public offer is made as part of the transaction. Even though the sale is private and the transaction is not disclosed on the stock market, there is a record of the transaction, which is sent to the government agency in charge of these types of transactions. When a share is transferred from one shareholder to another, an invitation should be sent to the new shareholder. The stock would be sold on a private basis.

In contrast to the private limited company, the public limited company (also known as LTD. company) is more transparent in its operations than the private limited business. Because it is available to any interested parties, the number of shareholders in this form of corporation varies. Shareholders may begin with as few as seven members and can increase in number until there is no limit or defined number.

Difference Between LTD and Pvt LTD Companies in Tabular Form

Table: LTD vs Pvt LTD Companies
Parameter of Comparison
Limited Company
Private Limited Company
Meaning
In this context, a public limited company refers to a firm that is publicly traded on a recognized stock market and whose shares are available for public trading.
In business, a private limited company is a firm that is not publicly traded on a stock market and whose shares are owned privately by the members who form the company.
Minimum number of members
7
2
Maximum number of members
Unlimited
If it is a one-person corporation, the max number is 200.
Minimum number of directors
3
2
Articles of Association
It has the option of drafting its articles of incorporation or adopting Table F.
It must draft its articles of incorporation.
Transfer of Shares
An open market known as a stock exchange allows for the unrestricted transfer of shares in a public corporation, which is also known as a free market.
A private company's shares are not freely transferable since the Articles of Association impose limits on the transfer of ownership.
Public Subscription
It has the authority to issue invitations to the general public to subscribe to its shares or debentures.
The sale of stock or issuance of debt instruments to the general public is forbidden.
Issue of prospectus
It has the option of issuing a prospectus or opting for a private placement of shares.
An issuer of prospectuses is prohibited from doing so.
The Minimum amount of allotment
The firm will not be able to distribute shares until the minimum subscription amount specified in the prospectus is met.
The corporation can distribute shares without requiring a minimum subscription.
Commencement of Business
After it has been incorporated, it is required to get a certificate of the beginning of the business.
It is possible to begin operating a company immediately after acquiring a certificate of incorporation.
Appointment of Director
The appointment of a single Director may be accomplished with a single resolution.
Using a single resolution, the board of directors may nominate two or more directors.
Filing of Consent to act as Director
To serve as a director, directors must register their permission to act as a director with the Registrar within 30 days after their appointment.
Directors do not need to file their permission to serve as a director to do so.
Retirement of Directors by rotation
By rotation, two-thirds of the entire number of directors must step down from their positions.
Retirement by rotation is not needed for the board of directors. The directors might be appointed for an indefinite period.
Place of Holding AGM
The annual general meeting (AGM) is conducted at the registered office or at any other location where the registered office is located.
The AGM might take place anywhere.

What is LTD Company?

Ltd. or Limited refers to a public limited company, which is a kind of corporation in which the shares of the corporation are held by the general public. A limited liability corporation is available to anybody who wishes to invest in it by purchasing shares in it. It must be open and transparent in all of its transactions, records, and other operations. According to the Companies Act, a public company may only use the suffix Ltd after the name of their firm and not the plural suffix public Ltd.

Even if only one person is participating in a limited business, who is the single shareholder and sole director, the company is still considered to be a separate legal entity, legally distinct from the individual involved.

Because a limited corporation is legally distinct from its owners, it may do the following:

  • It has the authority to engage in contracts in its name, including hiring employees.
  • Is accountable for its activities, and can sue and be sued.
  • Has the legal right to the money it earns through sales and can retain its earnings.
  • Is solely responsible for the payment of its bills and obligations

It's most probable that when someone talks about a limited firm, they're referring to a private limited liability corporation. The vast majority of limited liability firms in the United Kingdom are organized as private limited liability corporations limited by shares.

The ownership of the firm is split into shares, which are then distributed to the shareholders of the corporation. Each shareholder has the option to purchase one or more shares of the corporation. Their obligation is normally restricted to the amount of money they paid (or are obligated to pay) for the shares in question.

One share is provided to a single shareholder in many private limited businesses that are owned by a single individual. As a result, that shareholder has complete authority over the company and may exercise effective control over it. It would be the same if 100 shares were issued, but they were all issued to the same shareholder in this case.

A greater number of stockholders may be found in other businesses. The proportion of ownership, voting rights, and entitlement to any earnings distributed as dividends that each shareholder has then are primarily determined by the number of shares they possess.

What is Pvt LTD Company?

A 'Company' is a commercial organization that has been registered under the laws of a given country to do business there. It is an organization of natural individuals and/or legal entities (companies, limited liability partnerships, and so on) that have been registered under applicable legislation. Typically, businesses are created to make money. This collection, group, or organization of individuals may be deemed to exist in the eyes of the law, and the corporation is then recognized to be a "legal person" in its own right.

Speaking, a company is an organization of individuals created to carry on any activity that has been registered under the provisions of the Companies Act, 2013.

The term "Limited" refers to the fact that the financial liability of the business is limited to the value of the firm's shares that have not been purchased. This implies that if a firm has just one member (shareholder), and they each possess 20,000 shares with a value of £1, they would be responsible for £20,000 (if the money is not paid) at the time of winding up the company.

A private limited corporation does not need the consent of the relevant authorities to perform any commercial activities. The firm's owner is in complete control of all decisions about the company. To document its transactions and operations, a private limited business is neither required nor obligated to file financial statements with the government.

A private limited company is not required to be listed on a stock exchange, and small businesses, in particular, are unable to list on a stock exchange due to the high costs of doing so. The transfer of shares in a corporation is only accomplished with the permission of the present shareholders. In most cases, these shares are held by a group of people or by a single-family.

Main Differences Between LTD and Pvt LTD Companies In Points

  • The letters Ltd. denote a public limited corporation, while Pvt. Ltd. denotes a privately held limited firm.
  • The shares of a limited liability company are owned by the general public, but the shares of a private limited liability company are held by the private promoters or a group of private promoters.
  • The shares of a limited liability company (Ltd) are available to the general public, but the shares of a private limited liability company (Pvt Ltd) are not available to the general public.
  • The bare minimum number of shareholders in a limited liability company is seven, whereas the bare minimum number of shareholders in a private limited liability company is two.
  • There is no maximum number of shareholders in a limited liability company, however a private limited liability company has a limit of 50 shareholders.
  • The shares of a limited liability company (Ltd) are traded on the stock market, however this is not the case with a private limited liability business (Pvt Ltd).
  • The transfer of shares in a limited liability company is accomplished by the trading of stock on the stock market, but the transfer of shares in a private limited liability company is accomplished with the permission of all shareholders.
  • Private limited companies are often tiny businesses, while their public limited company counterpart is frequently linked with large corporations.

Conclusion

Regardless of whether the firm is a public limited company or a private limited company, there are some restrictions on what they may do. These corporations are formed for a certain reason, and they must carry out that mission in accordance with the laws and regulations established by the government of a particular nation. Private firms, on the other hand, are granted certain exemptions and advantages under the Companies Act in recognition of the charitable work that they do.

The term "public company" refers to a corporation that is listed on a fictitious stock exchange and is traded in the open market. Individuals own a private limited liability company (private limited liability business) that is not publicly traded on a stock exchange. For a public business to be established, there must be a minimum of seven persons. Instead, a private business may be established with at least two persons, which is preferable.

There is no restriction on the most extreme or maximum number of persons who may be employed by a public corporation. Another option is that private companies may employ up to 200 people at their most extreme, subject to certain requirements.

A public corporation should have a minimum of three executives, although a private limited business may have as few as two executives.

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"Difference Between Limited Company and Private Limited Company." Diffzy.com, 2022. Fri. 09 Dec. 2022. <https://www.diffzy.com/article/difference-between-limited-company-and-private-limited-363>.



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