Which is Better? Public Limited Company or Private Limited Company

Private Limited or Public Limited Company

Choosing the most suitable capital company types will help you know the common aspects and differences between limited and joint-stock companies. These two types of companies are different in terms of the responsibilities of their partners, capital, company organs, and Transfer of share transactions. The good sides that can enable public limited companies to be preferred over limited companies constitute the scope of our study.

What is a Private Limited Company?

The partners are not accountable for the company’s debts for their assets. They can be created by actual and legal persons with more shareholders. They can operate in all economic issues not prohibited by the law. At least one partner has the right to manage and represent the company, and the number of partners is 50.

What is a Public Limited Company?

It is a company type that can be established by legal persons with one or more shareholders. It can operate for all economic purposes and issues not prohibited by law, and the number of partners can be unlimited. The commercial volume of the joint-stock company is also high. It is also open to the interest of investors as they can do share transfers easily.

Advantages of the public limited company over the private limited company

• Capital amount and payment of capital

The primary capital, which represents the capital fully committed in the articles of association, is 50.000-TL. The initial capital cannot be less than 100.000-TL in non-public joint-stock companies that have accepted the registered capital system. A company can be established with a capital of at least 10,000 TL in limited companies.

• Registered capital system

It is possible to accept the “Registered Capital System” in all INCs, regardless of whether they are public or not. The Board of Directors is authorized to increase the capital up to the registered capital ceiling without holding the general assembly meeting. 

• Number of partners

In limited companies, the number of partners is at least one and 50. Joint-stock companies can have a minimum of 1 and a maximum of 500 shareholders. The existence of more than 500 shareholders is possible by being a public company. Of course, for companies established with special permission, the limitations in the relevant legislation apply.

• Going public and issuing bonds

Corporations have the opportunity to go public and issue bonds. However, Limited Companies do not have the chance to go public and issue bonds.

• Equity and equity printing

Share certificates can be the bearer or registered. Bearer share certificates cannot be issued for shares whose values have not been fully paid.

Limited companies cannot issue bearer shares. They can print a “registered share certificate” but only use it to prove a partnership. There is no tax advantage in selling registered shares of limited companies. It will be subject to tax-like Transfer. This situation is discussed extensively in the following sections of our study.

• Share transfer

The Transfer of share certificates is valid for the company and third parties only by transferring the possession. There is no obligation to move before a notary public to be approved or registered at the general assembly.

In limited companies, the Transfer of the basic capital share and the transactions that cause the transferred debt are made in written form, and the parties’ signatures are notarized. You must register share transfer approval with the Trade Registry. There is a stamp duty on the sale of restricted company shares.

• Obligation to work with a lawyer

It is not obligatory to work with a lawyer for limited companies. Still, if the capital amount is over 250,000 TL in joint-stock companies, it is mandatory to work with a lawyer.

The legal basis for the obligation to have a lawyer in joint-stock companies is included in the third paragraph of Article 35 of the Attorney ship Law No. 1136 [1].

• Management rights and representation authority

According to Article 365 of the Law, as mentioned above, the joint-stock company is managed and represented by the directors.

In joint-stock companies, at least one of the partners is not obliged to be a manager or representative of the board of directors.

• Corporate management

Joint-stock companies are more advantageous in terms of organization and corporate identity creation. It also creates a perception of a more reputable and prestigious company identity to the outside. Being a joint-stock company, The Company will cease to be a family business and gain a corporate appearance.

Tax advantages of joint-stock companies

Joint Stock Companies are subject to Corporate Tax Law with similar rules as other capital companies. There is no difference in deductible expenses or expenses that are not legally accepted, and the calculated financial profit is subject to 20% (22% in 2018-2019) corporate tax.

Corporations subject to special permission

By the Communiqué on the Raising of the Capital of Joint Stock and Limited Companies to New Minimum Amounts and the Determination of the Establishment and the Determination of the Joint Stock Companies Subject to the Permission to Amend the Articles of Association [5], the companies whose establishment and amendments to the articles of association are subject to the permission of the Ministry of Customs and Trade are as follows:

• Banks
• Financial leasing companies
• Factoring companies
• Consumer finance and card services companies
• Asset management companies
• Insurance companies
• Holdings established as joint-stock companies
• Companies operating foreign exchange kiosks, companies dealing with public merchandising
• Agricultural products licensed warehousing companies
• Product-specialized stock exchange companies, independent audit companies, surveillance companies
• Technology development zone management companies
• With companies subject to the Capital Market Law