The term public company usually refers to a company that is permitted to offer its registered securities (stock, bonds, etc.) for sale to the general public, typically through a stock exchange, or occasionally a company whose stock is traded over the counter (OTC) via market makers who use non-exchange quotation services.

The term "public company" may also refer to a company owned by the government. This meaning comes from the tradition of public ownership of assets and interests by and for the people as a whole (public ownership), and is the less-common meaning in the United States and the United Kingdom.

"Publicly-owned company" can also have either meaning, although in India and the United Kingdom it will usually be interpreted as meaning a company in the public sector (being owned by national, regional or local government). The term "public limited company" or simply "PLC", as used in the UK and Ireland, refers to a form of incorporation. A UK company must be incorporated as (or have converted itself to) a PLC in order to list its securities on the London Stock Exchange or AIM, though not all PLCs are listed.

Definition

Usually, the securities of a public company are owned by many investors while the shares of a private company are owned by relatively few shareholders. A company with many shareholders is not necessarily a public company. In the United States, in some instances, companies with over 500 shareholders may be required to report under the Securities Exchange Act of 1934; companies that report under the 1934 Act are generally deemed public companies. The first company to issue shares is thought to be the Dutch East India Company in 1601.

Advantages

It is able to raise funds and capital through the sale of its securities. This is the reason why public corporations are so important: prior to their existence, it was very difficult to obtain large amounts of capital for private enterprises.

In addition to being able to easily raise capital, public companies may issue their securities as compensation for those that provide services to the company, such as their directors, officers, and employees.

In comparison, private companies may also issue their securities as compensation for services, but the recipients of those securities often have difficulty selling them on the open market. Securities from a public company typically have an established fair market value at any given time as determined by the price the security is sold for on the stock exchange where the security is traded.

The financial media and city analysts will be able to access additional information about the business.

Disadvantages

Private companies have several advantages over public companies. A private company has no requirement to publicly disclose much, if any financial information; such information could be useful to competitors. For example, Form 10-K is an annual report required by the SEC each year that is a comprehensive summary of a company's performance. Private companies do not file form 10-Ks. It is less pressured to "make the numbers"—to meet quarterly projections for sales and profits, and thus in theory able to make decisions that are best in the long-run.