What is the Difference Between a Private and Public Limited Company?

Limited companies have some advantages for people who want to run their own businesses rather than becoming sole traders or forming a partnership. One of the main advantages of a limited company is that liability for shareholders or owners is limited and personal assets are protected.

There are four main types of limited company:

private companies which are limited by shares (the most common type)
private companies which are limited by guarantee
a private unlimited company
a public limited company

Forming public and private limited companies

You must notify Companies House when setting up any type of limited company; this is known as incorporation. HMRC will be automatically notified too, ready for Corporation Tax.

You can outsource registering a limited company to a solicitor, accountant, or an agent who deals specifically with company formations. Companies House also has an online incorporation service.

Public limited company (PLC)	Private limited company (Ltd)
A public limited company must have a minimum of £50,000 in share capital.	No minimum share capital.
Can sell shares on the stock market to raise money for the company.	Not permitted to trade on stock market. Can only sell or transfer shares privately.
Requires a qualified secretary and at least two directors, who are all different people.	Requires at least one individual to act as director, who must be at least 16 years old. This person can also be the sole shareholder. Doesn’t require a company secretary.

Both set ups are liable for Corporation Tax, which is payable on company profits. Directors are also required to register for Self Assessment, even if they only take a salary through the company.

Who are the owners in public and private limited companies?

Both private and public limited companies are owned by shareholders who make investments in the company. A public limited company requires a minimum amount of £50,000 as share capital, unlike a private company which has no minimum.

There are other compliance requirements for companies, too. For instance, public companies must display ‘PLC; after their name. Private ones must include ‘limited’ or ‘ltd’.

Liability in public companies versus private limited companies

The shareholders of both private and public limited companies are part owners of the company. But, a limited company exists in its own right, completely separate from the owner’s or shareholders’ finances. This means that the personal liability of the owners and shareholders is ‘limited’ (hence the name) to their investment.

If the company has debts, the shareholders and owners can’t be pursued beyond their investment in the company, protecting their personal assets. Creditors can only seize the company’s assets.

Selling ownership of a limited company

A private limited company can’t put shares up for public sale like a public limited company can. Instead, private companies sell or transfer shares through private sale or transfer.

Do public and private limited companies both submit accounts?

A public limited company must submit accounts within six months following its accounting year end. A private limited company can submit accounts up to nine months after the end of its accounting year.

When can my limited company start trading?

A private limited company can start trading straight after incorporation. Public limited companies must wait for a trading certificate before starting to trade.

Do I need to have annual general meetings (AGMs) for my limited company?

Private companies don’t need to schedule AGMs and regular meetings, whereas a public company must hold an annual general meeting.

Who can be an officer in a public or private limited company?

Generally, anyone can become a company director, although there are criteria to fulfil.

Company directors must be at least 16 years old, and younger than 70 years old.
You cannot become a company director if a court disqualifies you from holding a directorship.
Directors must not have any immigration restrictions which affect the work they can do in the UK as a director.
Public limited companies must have a company secretary, and this person must be appropriate for the role. Usually they will be a qualified barrister or accountant.
Private limited companies don’t have to appoint a company secretary, though they can do so if they wish. They don’t need to be a qualified person.

What are the advantages of forming a public limited company?

There are a number of advantages to consider for a public limited company. A public limited company may find it easier to raise capital, either from existing shareholders or new investors, as it can offer shares for sale to the public.

The shareholders of a public limited company also have greater freedom to buy or sell their shares. This also allows public companies to offer shares to other businesses that they want to acquire.

If you have questions about what you need to do to stay compliant with Companies House and HMRC, or need help with your business’s finance, use the Live Chat button to speak to one of our advisers. You can also call 020 3355 4047, or get a free instant quote for our online accounting services.

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About The Author

Beth-Anne Bruce

I'm an experienced and fully AAT and ACCA qualified accountant, who is enthusiastic about helping business owners succeed. I also love cooking and needlepoint (at different times!). Learn more about Beth.