Ltd companies invite investments from the general public while the Pvt Ltd companies do not offer their shares for sale. Apart from this contradiction, a host of differences exists between the two company types, to know about them go through our blog.
The Difference Between Ltd and Pvt Ltd Companies
Ltd denotes a Public Limited Compan, on the other hand, Pvt Ltd means a Private Limited Company. An enterprise is referred to as private limited only if all its shares happen to be distributed among private entities. A band of promoters own a Pvt Ltd Company. On the contrary, the shares allocated in an Ltd or Public Limited Company can be purchased by anybody. These enterprises are not under the ownership of a handful of promoters but the general population owns them.
Key Distinguishing Aspects of Ltd and Pvt Ltd Companies
Apart from the aforesaid dissimilarity, there is also a contradiction in the total number of shareowners in the two categories of companies. When we talk about Pvt Ltd companies, the lowest feasible number of bondholders should be two. The maximum number of shareholders can however sum up to 50. Now, as we move on to Ltd companies, the minimum count of owners must be seven while there is no threshold set for the upper limit of shareholders.
As we further learn about the share distribution, we find that shares can be readily etched in an Ltd or Public Limited enterprise whereas the same scenario does not hold for any Pvt Ltd Company. If ever there arises a need to transfer the shares of any Private Limited venture, the written consent of all the shareholders is needed to be procured first. This is simply because Pvt Ltd companies are not allowed to put forward a public offering for their shares. However, Public Limited organizations are entitled to the right of declaring a public offer via successive advertisement campaigns.
You will notice the shares of any Ltd corporation being enlisted in the National Stock Exchange. This is not possible if you look for the same in the case of Pvt Ltd companies. This infers that trading takes place involving an Ltd company within the stock exchange. This is again not applicable for a Private Limited Company.
Any Pvt Ltd company indicates a partnership business model; on the other hand, an Ltd or Public Limited Company conveys the concept of a full-fledged corporate entity.
Strict laws and regulations are stipulated over the working principle of all the Public Limited bodies. As we shift our focus to Pvt Ltd companies, there are no such cast-iron requirements or conditions that are set by the Indian Government for monitoring business operations and engagement.
Significance of Ltd Companies
Public Limited Company operates with more working capital. This is because the company shares are promoted to the open market at large so that anyone believing in the company’s business strategy can step forward to invest. This process enhances the cash flow of the company.
The Public Limited organization tends to seek more attention. As the shares get listed on hedge funds, mutual funds, etc., other traders track the business performance of the enterprise. These platforms create opportunities for a faster growth rate for any Public Limited Company.
As the company shares of this type of company are distributed to the general population the unsystematic risk concerning the market volatility is spread out.
Public Limited Company deals with a lesser amount of risk. As a result, there is an optimal chance for growing and evolving the business structure by investing in diverse projects. Large volumes of money can be invested comfortably, as they come from public contributions at large.
An Ltd company resembles a different legal entity apart from the owner. This concludes that the firm is credible for the monitoring and control of its fixed assets and liabilities, creditors and debtors. The owner cannot be blamed and suited against for the losses incurred through business affairs. The creditors have not been delegated any right to protest for a possible return loss during the course of the business.
A Public Limited Company or PLC comes with perpetual succession. This statement means that this category of companies will continue to exist until the Indian law enforcement bodies officially dissolve them. As PLCs are different legal entities, therefore the demise or cessation of a particular owner will not impact the existence of the brand. However, membership alterations take place if felt necessary by the new board of Directors.
Significance of Pvt Ltd Companies
Pvt Ltd Companies poses a limited threat to personal assets as the shareowners of this type of enterprise possess limited liability. To explain in simple words, a partnership business owner is liable to compensate for the venture’s liability up to the limit of the investment furnished by him. They do not have to pay out of their assets as there is no existence of personal liability.
Entrepreneurs prefer to register their start-ups as PLCs because the underlying conditions of any Pvt Ltd Company do not allow the proprietors to raise funds via equity. This inhibits the growth prospects and increases the liabilities.
Private Ltd Companies are more trustworthy in the sense that they are authorized under the ROC or Registrar of Companies as per the Companies Act enforced since 2013. Any individual is eligible to verify the metadata of an enterprise visiting the MCA portal. This portal even stores information about the directors, thus there is a provision to learn about them too. Thus Pvt Ltd type of business model seems reliable.
Other types of Companies
- Limited Liability Partnership
- NGO
- One Person Company
- Proprietorship Firm
- Partnership firm
Brief Study of each Company Type
| Ltd Companies | PVT Ltd Companies | LLPs | OPCs |
| Business secures high turnover, entrepreneurs who opt for external funding sources go for this type of registration. | The shares are not offered to the public, at large. These companies demand larger upfront costs from their partners. | LLPs are service-oriented businesses. These agencies require low investments. | These companies are owned by a single proprietor who’s responsible for profit and loss occurrence in business. |
| The number of members must be at least 7. | There must be a minimum of 2 members. The maximum limit is set to 50 members. | A minimum number of partners is 2 | There can only be one owner. |
| Compliance is high. | Medium compliance | Low compliance | Moderate compliance |
| Tax @25%; MAT not applicable |
Tax@30% +EC +SC MAT applicable |
Rate of tax is 30% AMT is there |
Tax@30% +EC +SC MAT applicable |
| Issues ESOP | Offers ESOP to staff | ESOP not applicable | ESOP not applicable |
| Fundraising is easiest among all other business models. | Fundraising depends on the cash inflows from the partners’ end. | Companies require moderate funds. | Fundraising is very difficult. |
Conclusion
When the shares of any enterprise stay in the private pool, such a company comes to be known as a Private firm. The Public Limited Companies are however open for all to invest in. PLCs highly maintain legal compliance and thus traders find these businesses trustworthy for investment. However, both categories have their pros and cons which must be duly examined to get full proof of knowledge about their business operation.
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