What is the Difference Between Limited and Private Limited Company? 

When starting a business in India, one of the first legal decisions you’ll make is choosing the right business structure. Two of the most common options are the Private Limited Company and the Public Limited Company—both governed by the Companies Act, 2013.

But what is the difference between a limited and private limited company? Why does it matter to business owners, investors, or partners? In this in-depth guide by Bright Advis, we explain the difference between public limited and private limited companies in terms of ownership, compliance, control, and more—so you can choose the structure that fits your business goals.

What is a Private Limited Company?

A Private Limited Company (Pvt Ltd) is one of the most popular business structures in India, especially among startups and small to medium enterprises. As per Section 2(68) of the Companies Act, a private company:

• Has a minimum of two and a maximum of 200 shareholders.
• Restricts the transfer of its shares.
• Cannot invite the public to subscribe to its shares or debentures.

Private limited companies are known for offering limited liability protection, operational flexibility, and ease of fundraising from private investors. They are not listed on any stock exchange.

What is a Public Limited Company?

A Public Limited Company (Ltd) is a company that is registered under the Companies Act and offers its shares to the general public. These companies are typically listed on a recognised stock exchange and can raise capital through public offerings.

Key features include:

• A minimum of 7 shareholders (no upper limit).
• A minimum of 3 directors.
• No restriction on share transfers.
• The ability to issue a prospectus and raise funds from the public.

This structure is best suited for large-scale businesses looking to expand rapidly and raise large amounts of capital from the market.

What is the Difference Between Limited and Private Limited Company?

Let’s break down what is the difference between limited and private limited company across several key factors:

Advantages and Disadvantages of Private Limited and Public Limited Companies

Advantages of a Private Limited Company:

• Limited Liability: Shareholders are not personally liable beyond their share capital.
• Greater Control: Suitable for small groups of stakeholders.
• Less Compliance: Lower regulatory requirements make operations smoother.
• Quick Fundraising: Venture capital and angel investors prefer Pvt Ltd structure.

Disadvantages of a Private Limited Company:

• Limited Fundraising Options: Cannot raise money from public markets.
• Restricted Share Transfer: Selling shares requires board approval.

Advantages of a Public Limited Company:

• Access to Capital Markets: Can raise large-scale capital via IPO.
• Improved Credibility: High public visibility and greater trust.
• Easy Share Liquidity: Investors can exit by selling shares in stock exchanges.

Disadvantages of a Public Limited Company:

• Stringent Compliance: Multiple reporting layers including ROC and SEBI.
• Loss of Control: Decision-making is often influenced by public shareholders.
• Increased Cost: Listing, audits, legal compliance increase operational costs.

Can a Private Limited Company be Converted into a Public Limited Company?

Yes. As a business grows and seeks to expand its capital base, it may convert from a private limited to a public limited company. This transition is allowed under the Companies Act, 2013.

Key steps include:

• Pass a special resolution at a general meeting.
• Alter Memorandum and Articles of Association.
• Increase the number of shareholders and directors as required.
• File necessary forms (MGT-14, INC-27) with the Registrar of Companies.
• Obtain fresh Certificate of Incorporation reflecting the new status.

Bright Advis offers end-to-end guidance for companies considering conversion.

Conclusion

Choosing between a Private Limited and Public Limited Company depends on your business model, funding needs, and growth stage. If you’re looking for controlled ownership with minimal compliance, Pvt Ltd might be ideal. On the other hand, if your goal is to scale quickly and raise funds from the public, Ltd company is the way to go.

Understanding what is the difference between limited and private limited company can help you make the right legal decision at the start. If you’re still unsure, Bright Advis is here to guide you through business structuring, compliance, and incorporation services tailored to your goals.

Frequently Asked Questions (FAQs)

Q1: Is there any similarity between Pvt Ltd and Ltd companies?
Yes. Both offer limited liability protection and are registered under the Companies Act, 2013.

Q2: Can a Pvt Ltd company raise funds publicly?
No. Only public limited companies can issue shares to the public.

Q3: Which is better for a startup—Pvt Ltd or Ltd?
Pvt Ltd is preferred due to ease of control, limited shareholders, and relaxed compliance.

Q4: Can a public company restrict share transfers like a private company?
No. Public companies must allow free share transferability as per the law.

Q5: What is the major difference between public limited and private limited companies in terms of compliance?
Public companies have higher disclosure and audit requirements, including SEBI norms.