Types of Companies

What is a Public Company?

When it comes to public company definition, many people say this company has a public share. However, a public company is a corporation whose ownership is distributed to several people by general public shareholders via the free trade of shares in the country's stock exchange. The daily trade in the market is amongst the best ways to determine the true values of the company. A company is said to be public when the shareholders can buy the company's stock. 

Types of Companies in India

India is said to be one of the fastest-growing economies globally, and the service industry needs to be praised for its contribution to the country's economy. Even foreign investors are now paying close attention to the Indian market for future investments. Given below, we have listed out different types of companies that can be formed in India.

  • Public company 

  • Private company 

  • Joint-Venture Company

  • Partnership firm

  • One person company

  • Sole proprietorship

  • Branch office

  • Non-government organizations. 

Private Company And Public Company

A private company is different from a public company in many ways. We have pointed out several differences, which will make it easier for you to understand which company is private and which one is public. 

Public companies are publicly traded in the open share market of the country. If you compare private companies with a public company, you will find out that public companies have a certain advantage if you compare it to private companies. Some of the famous public company names in India are Indian Oil Corporation. State bank of India, Hindustan Petroleum limited, etc.

According to a public company definition, a company with a minimum paid-up share capital of at least Rs five lakh or higher can be termed a public company. On the other hand, the public limited company members list has no end. It can be unlimited, but the minimum number of owners needs to be seven, and the directors need to be three simultaneously. 

In comparison to public companies, a private company needs to have two founding members, and at the same time, the company needs to have two directors. The founding members of the company can become directors as well. The minimum capital needs to be Rs 1,00,000. 

For a private limited company, each shareholder's liability or the company members are limited. As a result, if a company runs into a loss, the shareholders and the company members are fully reliable and they can sell the company's share to clear out the debt. The shareholders' asset is not at risk, so you don't need to worry about selling your apartment or land when a company reaches rock bottom! 

The private and public companies both need to have shareholders, but in the public company's case, no shareholder of the company is liable for the payment. Moreover, it's a separate legal entity, and every single shareholder is a part of it. 

Likewise, private companies are strictly regulated, and they are required to provide their financial statement to the government each year when the fiscal year ends. Besides, a public company can raise capital from the public by giving out shares through the stock markets.

They can also issue bonds and debentures, which are said to be unsecured debts issued by the company, by checking the company's financial performance and integrity. 

As a private company that needs two boards of directors, at least one board of directors must spend more than 182 days in India in the current year or in the previous year to start their company. 

Lastly, a private company is a business entity owned and run by private owners, and the government has nothing to do with its decision making. 

FAQs (Frequently Asked Questions)

1. What is a Public Limited Company in India?

A public limited company is found by the voluntary association of members, making it a separate legal existence with a limited number of members. All the information, work-related issues along with rules and regulations, come under the Indian Companies Act, 1956. A public limited company in India needs to have at least seven members. However, when it comes to the maximum number of board members, there is no limitation whatsoever. 

2. What Are the Benefits of Having a Private Company?

When you start a private company, you don't need to worry about minimum capital. It can be registered with a mere sum of Rs 10,000 as your authorized share capital. On the other hand, a private limited company is a separate legal identity in the eyes of court and law. Thus, liabilities and assets are not the same as the liabilities of directors running the company. A private company in India is the only form of business that can raise funds from different venture capitalist and angel investors.