Private vs public companies: Similarities and differences

Are you a private company owner considering converting to public company status, or perhaps you’re looking to set up a new business and are unsure which structure to choose? Understand more about the advantages and disadvantages of public and private companies to decide which is best for you. 

In this guide, we explain that public companies can sell shares to the public to raise funds, but they must meet tough regulatory and disclosure requirements. Private companies can’t list their shares on an exchange, although their regulatory requirements are lower. We’ll compare the two company types, outlining their differences and similarities, and the pros and cons of each option, to help you choose the right structure for your business.

What’s the difference between a private and public limited company?

The main difference between a private and public company is that a public company can offer its shares to the public and investors, usually by listing on a stock exchange. Private companies can’t offer their shares to the public. Public companies that want to enter the stock market do so through a process known as an initial public offering (IPO). 

Most UK companies are private companies. In the period 2024-25, 99.91% of companies on the Companies House register were private companies. There were just 4,222 public companies on the register over the same period, representing 0.09% of the total. 

Not all public companies are listed on a stock exchange. Unlisted or unquoted public companies issue shares that are traded privately or on over-the-counter markets. These public companies make fewer public disclosures and don’t have to comply with the same amount of regulation as listed public companies.  

Share capital and trading requirements

Public companies must apply for a trading certificate confirming they have a minimum issued share capital of £50,000 before they can begin trading or borrowing. At least one-quarter of the nominal (minimum) value of the share capital, and any premium (shares priced higher than the minimum value), must be paid up in full. So, if a company has the minimum £50,000 share capital required to go public, shareholders must have already paid £12,500 for those shares. 

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Private companies limited by shares can trade immediately after incorporation and are only required to issue one share (no minimum nominal value is required by law, but it’s typically £1). Private companies have a bit more flexibility in what they can do with their share capital. They can reduce the total number of shares in the company by going through a reduction of capital procedure using a solvency statement. Public companies need approval from the court to go through this process. Private companies can buy back their own shares out of capital; public companies can’t do this, although they’re allowed to use the other funding methods (e.g. using their profits). 

Director and company secretary requirements

Private companies must have one director; public companies must have at least two directors.  

Private companies can choose whether to appoint a company secretary. Under section 271 of the Companies Act, public companies are legally required to appoint a qualified company secretary.  

The Companies Act sets out criteria to be deemed a suitable company secretary for a public company, which are as follows: 

• Has been a company secretary of a public company for three of the five years before their appointment 
• Is a member of a specified professional body. The Act lists acceptable professional bodies, including the Chartered Governance Institute UK & Ireland and the main accountancy bodies.  
• Is a qualified barrister, advocate or solicitor  
• The directors are considered to be qualified

Filing obligations and AGMs

Private companies can submit their accounts up to nine months after the end of the accounting reference period (except for their first set, which are due 21 months from incorporation), whereas public companies must submit their accounts within six months (with their first set being due 18 months from incorporation).  The penalties for late filing of accounts are significantly higher for public companies than they are for private ones. 
 
Public companies must hold an annual general meeting (AGM), but private companies can choose whether to hold one.  

What do private and public companies have in common?

Private and public companies do have certain things in common. For example, both are distinct legal entities separate from their owners. Both can hold assets, agree contracts, and be involved in legal disputes. Both are governed by the Companies Act 2006. 

Shareholders of both company types have their liability limited to the unpaid amount of what they have agreed to pay for the shares. In other words, if they have agreed to pay £1 for a share, and have only paid up 20p, then their liability is 80p. 

Both company types are incorporated: they must be registered with Companies House and have a memorandum and articles of association.  

Private and public companies must comply with some of the same filing requirements. For example, both must file the following: 

• Confirmation statement 
• Annual accounts 
• Company Tax Returns 

Advantages and disadvantages of becoming a public company

Stakeholders can view public companies as more credible and prestigious because of the stricter regulatory, share capital and corporate governance requirements that apply to them. 

However, there are also disadvantages to being a public company. For example: 

• Less time to file accounts 
• Higher penalties for late filing of accounts 
• Can’t be formed by one person (needs at least one other director) 
• Needs an appropriately qualified company secretary 
• Requires larger financial contributions, thanks to the higher share capital requirements 

What are the disadvantages of becoming a listed public company?

There are also some disadvantages to listing your public company on a stock exchange. For example: 

• Possible leadership challenge. The existing company leadership and its shareholders could lose control of the company if an investor or a group of investors buy enough shares in the company to give them control of it. 
• Stricter regulation. Public companies face more rigorous regulatory requirements. For example, they must follow stricter accounting standards, be audited and hold an AGM.   
• Cost and time. Becoming a public company through the IPO process is expensive and time-consuming.  

How to convert a private company to a public company

Part 7 of the Companies Act 2006 outlines the conditions a company must meet to go public, namely:

1. Pass a special esolution of your members approving the conversion. At least 75% of shareholders must vote in favour to pass a special resolution.  
2. Change the company name to end in either ‘Public Limited Company’ or ‘PLC’  
3. Adopt appropriate articles of association for a public company 
4. Meet the minimum share capital requirements of £50,000, with a quarter already paid for (paid up) 
5. Have not previously re-registered the company as unlimited 
6. Submit form RR01 to Companies House 
7. Appoint at least two directors and a qualified company secretary 

How to list on a stock exchange

Listing your company on a stock exchange is called an IPO – it’s where you offer shares in your company to the public and investors for the first time. In the UK, a small business is best suited to the Alternative Investment Market (AIM) market. 

The IPO process can be time-consuming and complicated. You’ll have to do a lot of preparation to review the health of your business to ensure its suitable for a public listing. You’ll also need to hire a range of advisers, for example a broker (to inform you about the market and the demand for your shares), an accountant, a law firm and a registrar (to manage your register of shareholders). You could use a financial PR firm as well to raise the profile of your company. 

Is a private or public company the right structure for you?

It’s worth weighing up the pros and cons of private and public company status to decide which is right for you. Most early-stage companies are best suited to private company status because set-up is quicker, and there are fewer regulatory and disclosure requirements.  

Public companies must publish more information than private companies, which could be burdensome for a small company that’s just starting out. If you choose to list your public company on a stock exchange, this is even more so the case – for example, you’ll need to have certain governance processes in place and provide additional regulatory information. 

If you want to significantly expand your company, a public listing could help you raise the additional funding you need. A public listing will also raise the profile of your company and enhance its reputation.  

Some examples of when to choose private or public company status are as follows: 

• A small clothing business with three employees would be best served by private company status 
• A fast-growing tech company could convert from private company to public company to raise funds 
• A large clothing retailer with strong profits, a management team and good governance could choose public company status 

How to set up a business

Whether you want to incorporate as a private limited company or need guidance on the right structure for your goals, Quality Company Formations has a formation package to suit every business.