Generally speaking, there are three types of business organizations: sole proprietorship (also known as a sole trader), partnership and incorporated companies. Incorporated companies are divided into companies limited by shares and companies with unlimited liability, which may be public or private. Therefore, we may have a private company limited by shares, a public company limited by shares, a private unlimited company and a public unlimited company. See section 21(2) Companies and Allied Matters Act (CAMA).
DIFFERENCES BETWEEN A PRIVATE COMPANY AND A PUBLIC COMPANY
Some of the differences between public and private companies include the following:
the name of a private company must end with the word ‘limited’ (ltd), while the name of a public company must end with the words (PLC)
A public company can offer its shares to the public, but a private company cannot.
A public company must hold a statutory meeting while a private company is not required to hold such a meeting (a statutory meeting is that which a public company must hold 6 months after incorporation)
There are set qualifications in the CAMA required to be satisfied before anyone can be appointed secretary for public companies, while no such requirements exist for a private company.
Special notice of age of Directors above 70 years should be given in a public company, while this notice is not required in a private company.
A PUBLIC COMPANY IS RECOMMENDED WHERE:
a medium or large-scale business needs to acquire corporate status
the capital available to start off a business is relatively large.
the business organization would have access to public funds by offering its shares for subscription.
membership is not limited or restricted.
the business organization is not driven by family ties or relationships.
A PRIVATE COMPANY IS RECOMMENDED WHERE:
the capital available is relatively small
family and friends want to engage in business and enjoy corporate personality
small and medium-scale business organizations need to acquire incorporated status
NOTE: There are also two types of non-business organizations- companies limited by guarantee and incorporated trustees. While a company limited by guarantee is an incorporated company, it is not an actual business organization in that the company is not permitted to carry out business activities with the aim of sharing the proceeds amongst its members.
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