Explain why a public company is not necessarily a company owned by the state.
Private and public describe a legal status related to the company's shares; Ltd. describes liability, not the same classification.
A public company is, according to the statutory definition, a company whose shares are registered for trading on the stock exchange or were offered to the public pursuant to a prospectus and are held by the public. A private company is a company that is not public. A large company can be private, and a public company is not necessarily government-owned. A private company can also be an Ltd. There are different reporting and regulatory obligations; a private company may have additional reporting obligations, for example when it issues bonds to the public. Public classification is not a guarantee of profit or investment safety.
A fictional company has thousands of employees but its shares are held privately. The number of employees alone does not make it public.
Explain why a public company is not necessarily a company owned by the state.
Three partners own a fictional private company in shares of 50%, 30% and 20%. If the first sells ten percentage points to the second, ownership becomes 40%, 40% and 20%. The company may receive no new money; payment can pass between shareholders. Issuing new shares to raise company capital is different. Public companies have additional disclosure requirements, but the distinction still matters. Trading between investors differs from company fundraising, and public does not mean government-owned.
Concepts that help you compare
Issuing and trading shares: who receives the money?
Issuing new shares can raise money for a company. In trading between investors, the seller usually receives the money. Tradable shares allow investors to buy and sell on the market. Public companies have reporting obligations, but reporting and oversight do not guarantee success. A private company is not necessarily small, and a public company is not necessarily government-owned. Trading between investors is not always new money entering the company.
Comparison example: Buying from another investor on the stock exchange usually transfers the proceeds to the seller. Issuing new shares by the company can raise money for the company.
A Business: Sole Proprietor and a Limited Company (Ltd.)
A company is a separate legal entity; 'Ltd.' indicates limited liability of the shareholders under the law. A sole proprietor and a company are not the same. A company has its own assets, liabilities and reporting obligations. Its money is not the private wallet of the shareholder. Salary, dividend and owner withdrawals are different things with different rules. Limited liability is not immunity: personal guarantees, personal liability in appropriate cases and piercing the corporate veil according to law may change the outcome. Registering a company also involves costs and reporting. VAT classification and form of incorporation are two separate axes.
Comparison example: A fictional company has 20,000 ₪ in its account. The shareholder cannot assume that the entire amount is freely available personal money; there are liabilities and rules for transferring funds.