Differences Between Public and Private Companies

In today's class, we are exploring the fundamental differences between public and private companies, focusing on their characteristics, ownership structures, capital raising abilities, and operational requirements.

Public Company vs. Private Company
1. Ownership:

Public Company:
Minimum of 7 owners, no maximum limit.
Owned by shareholders.
Private Company:
Minimum of 2 owners, maximum of 50.
Owned and controlled by individuals who contributed capital.
2. Capital Raising:

Public Company:
Can raise capital by selling shares to the public.
Can issue debentures.
Private Company:
Cannot raise capital from the public.
Cannot sell shares publicly.
Does not issue debentures.
3. Share Transferability:

Public Company:
Shares are freely transferable from one person to another.
Private Company:
Shares cannot be transferred without the consent of other members.
4. Management and Control:

Public Company:
Owned by shareholders.
Controlled by a Board of Directors.
Private Company:
Owned and controlled by those who contributed the capital.
5. Business Commencement:
Public Company:

Cannot commence business until it obtains both the Certificate of Incorporation and the Certificate of Trading.
Private Company:

Can commence business with only the Certificate of Incorporation; it does not need a Certificate of Trading.
Summary
Understanding the differences between public and private companies is essential for anyone involved in business, finance, or entrepreneurship. Public companies have greater flexibility in raising capital and transferring shares but face stricter regulations and requirements

for starting and operating their business. Private companies, on the other hand, benefit from more control by their owners and simpler operational requirements but have limitations on capital raising and share transferability.

By exploring these distinctions, we gain insight into the strategic considerations businesses must evaluate when deciding their organizational structure and growth strategies.