If you want to start a company, you are probably torn between a public or private company. The article below will offer a detailed explanatory of both of them and their advantages. You can also contact Karl Schranz to offer business advisory services.
What are public companies?
A public company is a type of corporation that the ownership is distributed among public shareholders. The general public can acquire the company’s shares through shares on the stock exchange or other public markets.
The companies are traded in the open market, and public investors are invited to buy the shares. Most of the public companies started as private then convert to public companies after meeting regulatory requirements.
A public company must have a minimum of 2 shareholders and three directors. Most states require that all public companies file their tax after six months. Also, the company should have a qualified company secretary who will be responsible for the company’s administration.
Advantages of public companies
- Generate revenue through the sale of shares to the public.
- Public companies can access debt markets through the selling of equity stakes.
- Shareholders can raise capital through the sales of shares in the stock exchange.
- It is possible to make acquisitions with public companies.
- The price of the shares determines the value of the firm.
- The public company is better positioned to attract investors, lenders, and donors due to its creditworthiness.
- A public company’s prospects are better, and it can significantly raise its value within a short life span. Such a strategy positions the company better in the market.
Private companies are privately owned by the initial founders, management, and some private investors. The shares of the company cannot be shared in the stock exchange market for sale. Their legal requirements are less strict than those of the public company.
Advantages of the private company
- Less procedural-the process of opening a public company is simple, and few stakeholders are involved. In the start-up stage, only two directors are required, while the public company requires three.
- After incorporating the private company, you can immediately start working, but a public company requires a certificate of commencing to begin operating.
- The process of collecting and allotting shares is simple, and the formalities are minimal.
- In the holding of a statutory meeting, an outsider is not required to witness the meeting.
- The private company does not have to involve the general public in various decision-making processes. They can quickly appoint or hire staff in the company.
- It is possible to extend loans to the directors without having to consult the government.
Lastly, private and public companies are corporations that involve the trading of shares. However, for the public company, the shares are open to the public via the stock exchange market. In contrast, the private company’s shares are only accessible to shareholders and private investors. Both corporations are advantageous, and you can opt for the one that best suits your business needs. Consulting an expert is the best way to know which company is good for your operations.