Company formations

The difference between a private and limited company

A private limited company is an individual legal entity. It is limited in that it assets, liabilities, profits and losses are limited to the company and so protects the owners and officers of the company from any financial liability if the company finds itself in financial difficulty. Whereas a public limited company can sell shares to the public a limited company is restricted to the division of shares within the ownership of the company.

A private limited company cannot trade its shares on the stock market or offer shares to the general public. However, private limited companies, whilst they may be much smaller than public limited companies are still required to product profit and loss accounts, hold meetings as stipulated by Companies House and share any profits between all of the shareholders.

Other differences are that public limited companies can opt to raise money by selling shares on the stock market. Private limited companies are not allowed to do this because they cannot offer shares to the public. This really is the key difference between public and private companies.

Public limited companies must also have two shareholders and two directors and a qualified company secretary.

In order to start a public limited company Companies House must be satisfied that at least 50,000 worth of shares have been issued before it can receive authorization to conduct business.

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