Private vs Public Companies: Australian Business Structures Explained

If you’re weighing up business structures in Australia, understanding the difference between a private company and a public company is a key early decision. The choice affects how you raise money, your reporting obligations, who controls decision-making, and how the market perceives your brand.

In Australia, a private company is formally called a proprietary limited company (Pty Ltd), while a public company ends in “Ltd”. Both offer limited liability, but they’re built for very different goals. In this guide, we’ll compare private vs public companies in plain English, cover the legal requirements that actually matter, and share practical tips so you can choose a structure that supports your growth.

Wherever you’re headed - staying closely held or eyeing an ASX listing one day - we’re here to help you set up the right way and stay compliant as you scale.

What’s the Difference Between a Private and Public Company?

At a high level, the difference comes down to who can invest and how much you need to disclose. Private companies are built for private ownership and control. Public companies are designed to tap broader capital markets and operate under greater scrutiny.

Private Companies (Proprietary Limited – Pty Ltd)

A proprietary limited company is the most common structure for Australian startups and SMEs. Core features include:

• Limited to private ownership with up to 50 non-employee shareholders.
• Cannot make public offers of shares or list on the ASX (there are narrow fundraising pathways - more on that below).
• Share transfers are typically restricted and subject to approval under the Company Constitution or a Shareholders Agreement.
• Must have at least one director who ordinarily resides in Australia.
• Lower ongoing disclosure than public companies. However, large proprietary companies must prepare, have audited, and lodge financial statements with ASIC.
• Company name ends with “Pty Ltd”.

Public Companies (Ltd)

Public companies are built for broader investment and tighter regulation. Key aspects include:

• Can offer shares to the public and may list on the ASX.
• No cap on the number of shareholders.
• Must have at least three directors (at least two must ordinarily reside in Australia).
• Must have at least one company secretary who ordinarily resides in Australia.
• Must hold an annual general meeting (AGM) and meet rigorous financial reporting and audit requirements.
• Listed public companies are subject to continuous disclosure under ASX Listing Rules and the Corporations Act.
• Company name ends with “Ltd”.

Both structures are incorporated under the Corporations Act 2001 (Cth), but the legislative obligations are very different in practice.

Private vs Public: Key Differences That Impact Your Business

• Raising Capital: Proprietary companies can’t invite the general public to invest. They typically raise money through private placements, small-scale offerings, or from professional investors. Public companies can issue a prospectus and raise funds broadly - and if listed, on the ASX.
• Investor Limits & Control: Private companies are capped at 50 non-employee shareholders and often keep control close to founders. Public companies can have thousands of shareholders, which can dilute decision-making.
• Disclosure & Reporting: Public companies - especially listed entities - face extensive disclosure, audit, AGM and governance requirements, leading to higher compliance costs. Proprietary companies disclose less, though large proprietary companies must lodge audited financial reports with ASIC.
• Governance Structure: Private companies can operate with a simpler board (minimum one resident director). Public companies need a larger board, a resident company secretary, and formal shareholder meetings.
• Market Perception: Public companies benefit from visibility and potentially greater access to capital. Private companies benefit from privacy and flexibility.

If you’re still deciding between structures, it can help to understand how each works day-to-day. You can also review a practical comparison of public vs private company pros and cons to map the differences to your business goals.

How Do I Choose Between a Private and Public Company?

Most Australian businesses start as private (Pty Ltd) companies. Going public is a major step often driven by scale and funding needs. To decide what’s right for you, consider:

• Your growth plan: Are you building a tightly held business, or aiming for significant external investment and possibly an eventual listing?
• Funding needs: Will private placements and early-stage rounds be enough, or do you foresee needing broader public capital? If you’re early-stage, explore practical pathways in capital raising for startups.
• Control vs. scale: Proprietary companies preserve founder control. Public companies enable scale but introduce dispersed ownership and external oversight.
• Compliance budget: Public company governance (and listed company obligations) require time, budget, and systems. Be realistic about resourcing.
• Exit strategy: If you want a liquidity event via a listing, a public company structure may be part of that journey. Private companies often facilitate sales via private share transfers or trade sales.

It’s completely normal to start as a proprietary company. You can re-assess structure as your funding model and ambitions evolve.

Do Private Companies Have Shareholders?

Yes - private companies are owned by shareholders. The cap is 50 non-employee shareholders, and transfers are typically restricted by your Constitution or Shareholders Agreement. Employee shareholders (for example, through an option plan) don’t count towards the cap.

How Can You Tell if a Company Is Public or Private?

• Look at the legal name. “Pty Ltd” means proprietary; “Ltd” means public.
• Check fundraising behaviour. If it offers shares to the public (and especially if it’s listed), it’s a public company.
• Search ASIC records to confirm status, officers and lodged documents.

If you want a quick primer on public companies in Australia, this Q&A on what is a public company is a helpful starting point.

Fundraising Rules: What Can Each Structure Do?

Fundraising is where the two structures diverge sharply - but there are nuances for proprietary companies that are often overlooked.

Proprietary (Pty Ltd) Companies

As a rule, proprietary companies cannot make public offers of shares. However, there are limited pathways to raise funds without a full prospectus:

• Small-scale offerings: Often called the “20/12/$2m” rule, section 708 of the Corporations Act allows certain offers without a disclosure document within specific limits. See a plain-English overview of section 708 small-scale offerings.
• Offers to sophisticated or professional investors: There are exemptions for offers to investors who meet wealth or certification thresholds.
• Crowd-sourced funding (CSF): Eligible proprietary companies may be able to use the CSF regime if they meet additional governance and reporting requirements set out in the law.

These pathways still come with strict rules. It’s important to structure offers carefully, keep accurate records, and ensure your Constitution and Shareholders Agreement align with your fundraising plans.

Public (Ltd) Companies

Public companies can offer shares to the general public, usually by issuing a disclosure document such as a prospectus. If listed, they can also access the market via placements, rights issues and other capital management tools allowed by the Listing Rules.

With access to public capital comes higher scrutiny. Listed entities must comply with continuous disclosure, promptly announcing price-sensitive information to the market.

Quick Note on Tax

Capital raising and corporate restructuring can have tax consequences for both the company and shareholders. Tax outcomes vary based on your structure and the specifics of a deal, so it’s best to obtain independent tax advice in parallel with any legal work.

Compliance, Governance and Reporting: What You Must Do

Every company has ongoing obligations. The depth and frequency of those obligations depend on whether you’re proprietary or public - and, for proprietary companies, whether you are “small” or “large” under the Corporations Act.

Proprietary Companies

• Directors and officers: Minimum one director who ordinarily resides in Australia. A company secretary is optional.
• Financial reports: Large proprietary companies must prepare, have audited, and lodge annual financial statements with ASIC. Small proprietary companies generally have lighter reporting, unless directed by ASIC or shareholders.
• Internal governance: Your Company Constitution governs board decisions, share transfers and procedural rules. Many companies supplement this with a detailed Shareholders Agreement.

Public Companies

• Directors and secretary: Minimum three directors (two resident in Australia), and at least one company secretary who ordinarily resides in Australia.
• AGM and financial reporting: Must hold an AGM within five months of financial year-end, and prepare and lodge audited financial statements with ASIC.
• Continuous disclosure: Applies to listed public companies under the Corporations Act and ASX Listing Rules - you must promptly disclose information that a reasonable person would expect to have a material effect on price or value.

If you’re setting up a new entity, getting the foundations right from day one - from board processes to share registers - will save time and cost later. If you’re still at the planning stage, you can speak to us about a streamlined company set up tailored to your goals.

Essential Legal Documents for Private and Public Companies

Strong documents keep decision-making clear, protect your rights, and help you look investor-ready. The specifics will depend on your industry and growth plans, but most companies should consider:

• Company Constitution: Your internal rulebook for governance, share transfers and meetings. Many companies adopt a tailored Company Constitution rather than rely on replaceable rules.
• Shareholders Agreement: Sets expectations between owners, including board rights, exit mechanics, pre-emptive rights and dispute resolution. A Shareholders Agreement is especially important in proprietary companies.
• Board and shareholder resolutions: Formal records of decisions, critical for audits, due diligence and compliance.
• Disclosure documents (public fundraising): Prospectus or other permitted offer documents when raising funds from the public.
• Employment Contract: Protects your business and sets clear obligations with staff. A well-drafted Employment Contract reduces risk and aligns with Fair Work requirements.
• Customer terms and contracts: Clear customer contracts or online terms manage liability, payment, IP and service levels.
• Privacy Policy: If you collect or hold personal information, you’ll need a compliant Privacy Policy and practices consistent with the Privacy Act and the Australian Privacy Principles.

Not every company needs every document, but most will need several. The right mix depends on your structure, industry and growth stage.

Thinking About Capital Raising Soon?

If fundraising is on your roadmap, invest early in clean governance (Constitution and cap table hygiene), transfer restrictions that match your round mechanics, and clarity on founder vesting. You can also explore early-stage options via capital raising for startups and ensure any offers fit within the rules of section 708.

When Should a Business “Go Public” - And What’s Involved?

Moving from a proprietary company to a public company (and potentially listing) is a strategic leap. Common drivers include large-scale expansion, employee liquidity, founder or investor exits, and brand profile.

If you decide to go public, expect:

• Significant preparation: Legal due diligence, audited historical financials, governance enhancements, and prospectus drafting.
• Higher ongoing costs: Public company compliance requires dedicated resources and robust internal systems.
• Greater scrutiny: Listed entities report to the market continuously and manage investor relations actively.

For many businesses, remaining private offers the right balance of control, flexibility and cost - at least for the early and growth stages. If you’re exploring pathways, you can also check director eligibility and residency rules early; here’s a practical refresher on resident director requirements.

Can You Change Your Structure Later?

Yes. Many companies start as proprietary and convert to public when the timing and financials make sense. There’s a legal process to transition (and potential tax and commercial implications), so plan the change with expert legal and tax advisers.

Key Takeaways

• Private (Pty Ltd) companies are designed for private ownership and control, capped at 50 non-employee shareholders and generally lighter disclosure - though large proprietary companies must lodge audited financials with ASIC.
• Public (Ltd) companies can raise capital from the public and may list on the ASX, but face tighter governance, reporting, AGMs, and - for listed entities - continuous disclosure obligations.
• Proprietary companies can still raise money through limited pathways such as small-scale offerings under section 708 and, if eligible, the CSF regime - all with strict rules.
• Get your foundations right: adopt a tailored Company Constitution, use a Shareholders Agreement, put in place strong Employment Contracts, and publish a compliant Privacy Policy.
• Going public is a major strategic move that demands extensive preparation and ongoing resources; many businesses successfully stay private for the long term.
• Funding, structuring and exits can carry tax implications. Obtain independent tax advice alongside your legal planning.

If you’d like a consultation on whether a private or public company structure is right for your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.