The
fundamental difference between private limited company and public limited company is that, the former is restricted only to private group of people and
they can easily get the control of the company, whereas a
public limited company can issue its shares to the general public and they have
to obtain a certificate of trading before start doing business. There are many
merits (advantages) and demerits (disadvantages) for private and public limited
companies. They are;
Merits of Private Limited Companies;
1)
They can easily keep the control
of the company as the shareholders cannot transfer their shares without the
consent of other shareholders
2)
As soon as they certificate of incorporation they can start trading
3)
No minimum limit for the share capital
4)
Limited liability for all share holders
5)
These companies have Separate legal entity
Demerits for Private Limited Companies;
1)
They need to publish their accounts to the Registrar of companies
2)
The shares are not easily transferable.
3)
They cannot appeal to the general public to buy their shares
Merits of Public Limited Companies;
1)
The Company can appeal to the public to
buy the shares, so it is easy to accumulate huge financial resources.
2)
It enjoys all the benefits of large
scale such as Economies of scale.
3)
It can expand the business by issuing
new shares and debentures as there is no restriction to the maximum
number of members. So it has great potential and better scope for
expansion, diversification and growth.
4)
The Shares of a public limited company are freely transferable and are available for disposal and ensures
maximum protection to the investors.
5)
The companies are effective media to stimulate the mobilization of savings of the community into investment.
6)
Formation and working of the companies
are regulated by the provisions of the companies act and so it safeguards the interests of the shareholders.
Demerits of Public Limited Companies;
1)
The formation of a company requires too
many legal formalities and it is very expensive and lengthy process.
2) A
public limited company has to observe and follow the rules and regulations
issued by the Registrar of Companies from time to time. The excessive Government controls affect the smooth
functioning of the organization.
3)
Undue speculation in shares of a company is harmful to the investors.
4)
The legal obligations restrict the company, so that they cannot quickly adjust with the changing
conditions in the domestic and international market.
5)
Public Limited companies give way for formation of business combinations which
ultimately lead to monopolistic control
and exploitation of the customers.
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