Difference between Public Company and Private Company

To be able to talk about this topic with complete peace of mind and knowledge, first we are going to make a basic definition of what a company is and then we will differentiate the two types of companies that exist; By fully understanding that, then we will better understand the differences between companies.

What is a company?

Companies are organizations formed to achieve objectives. For this they have human, material and financial resources, with which they produce goods, provide services or market products.

The companies can be classified in multiple ways, depending on its size, objectives, structure, composition, among many others. One of the best known forms of classification separates them into Public Companies and Private Companies.

Public enterprises

The public enterprises They are governmental organizations, that is to say that they are part or that belong to the State. Depending on the country where they carry out their activity, this type of company can:

• Belong 100% to the national government or country.
• Have a percentage of shareholding in the company, in the decision making economic, and can also intervene in the regulations that govern it and in decisions about property.
• There are countries in which the sale of these shares corresponding to public companies is allowed. However, it is limited by the maximum amount allowed. In this case, the sale of up to 49% allows it to maintain its essence as a public company. But, if a sale of more than 51% of the shares results and the majority of its participation is lost, it ceases to be a public company to become a private company.

Characteristics of Public Companies

Public companies are characterized by presenting, in most countries, the following features:

• The public company is conformed by legal mandate.
• Theoretically, each of the citizens is a participant in each public company.
• They can put part or all of their stock package up for public sale, so anyone can buy some of them.
• By law, they are required to make their financial information public.
• In the case of obtaining profits, these are destined to the public company itself or to the State coffers.
• Generally, its main objective is to offer a public service to the group of inhabitants. In addition, depending on the country, they can be: for the maintenance of public lighting, roads, security, electricity, water, telephone services, among many other types.
• They are in charge of ensuring the common good of the inhabitants of a community, they serve the collective.
• They do not seek profit from their activities. Financial benefit is not part of your objectives.
• You do not have the need to face the competition, so you do not feel the pressure to respond to the urgency of the requirements of the users of its services, nor to satisfy their needs, something counterproductive if you want to evaluate their quality of service, effectiveness and effectiveness.
• The national government has the power to appoint the highest authorities of public companies. As well as it also has the power to make important decisions, generally based on the political repercussions that could ensue with them.
• In general, workers who are part of public companies are hired in various ways: for professional fees, permanent hiring, trusted personnel or base personnel, each of these types of hiring may have greater or lesser stability labor. For example, grassroots workers will have less concern about looking for work in another company since, in general, these types of positions are permanent. On the contrary, a trusted worker will change their employment status in the same way that they can change the highest authorities of the public company in particular and the national government in general.

Characteristics of Private Companies and differences with Public Companies

The private businesses They are characterized by being formed by private capital and initiative, some of their features are:

• Creation by individuals.
• In principle, it is not made up of the government, but the government does exert pressure on it.
• The capital of the company belongs exclusively to the investors and the owners of the company.
• Its highest authority is a board of directors, made up of a variable number of participants, who together are in charge of making strategic managerial decisions.
• The board of directors is headed by the president of the company, who in turn is also usually its owner.
• After the board of directors issues a resolution or makes a decision, it is immediately executed.
• The government requires compliance with laws, taxes and taxes and the private company must abide by them and always comply with them, or penalty of fine or sanctions. Some regulations to which they must also submit are those related to the social security of their workers, the social benefits of their workers and many others related to the work activity and the branch that plays.
• Its main objective is the economic profit, as well as the maximizing your profits, the market positioning, customer loyalty and durability over time.
• Its profits are distributed in the form of profits to its owner shareholders.
• You need to make a profit in order to survive.
• The job stability of its employees and workers will depend on the performance of its functions and its supervisors. There may be cases where workers with good evaluation they may be considered for new positions with greater responsibility and promotions.