- Proprietary (Pty Ltd) companies are privately held and generally cannot offer shares to the public.
- Public (Ltd) companies can have an unlimited number of shareholders and may raise funds from the public.
- Only some public companies are listed on the ASX.
- Public companies have stricter governance, reporting, and officeholder requirements.
- Small businesses and startups commonly use proprietary companies, while public companies suit larger businesses, charities, and organisations seeking broader investment.
Choosing the right company structure is one of the first major decisions when starting or growing a business.
While people often refer to a “private company”, Australian law more commonly uses the term proprietary company. Alongside proprietary companies, public companies are the two main types of company recognised under the Corporations Act 2001 (Cth).
The differences between these structures go beyond whether a business is publicly traded. They affect shareholder numbers, fundraising options, governance requirements, reporting obligations and future growth opportunities.
Understanding these distinctions can help founders, investors, and organisations choose the most suitable structure before registering a company or deciding whether to convert an existing one.
- What is a private company in Australia?
- What is a public company in Australia?
- Public company vs private company
- What are the reporting obligations for public and private companies?
- What are the director and secretary requirements?
- When should you choose a proprietary company?
- When should you choose a public company?
- Can you convert a proprietary company into a public company?
- Public vs private company checklist
- When should you get legal advice?
- FAQs
What is a private company in Australia?
In Australia, a private company is usually a proprietary company, which is identified by the words “Pty Ltd” at the end of its name. Proprietary companies are by far the most common company structure for Australian businesses.
They are popular with small businesses, startups, family businesses, and privately owned companies because they provide a separate legal entity with limited liability while maintaining relatively simple governance requirements.
Keep in mind that:
- A proprietary company can’t offer shares to the public to raise capital.
- Ownership is typically limited to founders, employees, and private investors.
- You can have no more than 50 non-employee shareholders.
Additionally, reporting obligations vary by size, where larger proprietary companies face additional financial reporting and audit requirements.
For many businesses, a proprietary company offers the right balance between flexibility, limited liability, and administrative simplicity.
What does Pty Ltd mean?
“Pty Ltd” stands for Proprietary Limited.
Proprietary indicates that the company is privately held rather than being a public company and faces certain restrictions (such as the number of shareholders).
Limited refers to the limited liability enjoyed by shareholders, which protects their personal assets.
A Pty Ltd company is a separate legal entity from its owners. This means the company can own property, enter into contracts, employ staff, and commence or defend legal proceedings in its own name.
However, limited liability doesn’t remove directors’ legal responsibilities, such as acting in good faith, exercising reasonable care and diligence, and avoiding insolvent trading.
Can a private company sell shares to the public?
Generally, no. One of the defining features of a proprietary company is that it can’t raise funds by offering shares to the public.
However, this doesn’t mean that proprietary companies can’t issue shares at all. They may issue shares privately to:
- Founders
- Employees
- Existing shareholders
- Selected investors
To do so, they must comply with the Corporations Act, the company’s constitution, any shareholder agreement, and applicable fundraising provisions. Depending on the circumstances, certain fundraising exemptions may also apply.
If you plan on raising capital, it’s best to get legal advice before proceeding. You should also ensure robust documentation throughout the process to prevent future disputes.
How many shareholders can a private company have?
A proprietary company may have up to 50 non-employee shareholders.
Note that employees who hold shares are generally excluded from this calculation, so businesses can reward staff with equity without necessarily affecting the shareholder cap.
If you exceed this limit through future investment rounds or ownership changes, consider your options early. Exceeding the cap may require structural changes, including converting to a public company.
What is a public company in Australia?
A public company operates under a different legal framework and is designed to accommodate broader ownership and fundraising.
Unlike proprietary companies, public companies:
- Can have an unlimited number of shareholders
- May be able to raise funds from the public, subject to the fundraising requirements in the Corporations Act.
Importantly, not every public company is listed on the Australian Securities Exchange (ASX). Public companies may be:
- Listed on the ASX or an alternative exchange
- An unlisted public company
- A public company limited by shares, which is commonly used by larger commercial businesses seeking investment
- A public company limited by guarantee, which is normally chosen by charities, sporting organisations, industry associations and other not-for-profit organisations
Public companies are subject to more comprehensive governance and reporting obligations, including stricter rules on directors, company secretaries, and financial reporting.
For businesses planning significant expansion or public fundraising, a public company structure may be more appropriate despite the additional compliance obligations.
Does a public company have to be listed on the ASX?
No. This is a common misconception. In reality, public companies can be either listed or unlisted.
Listed public companies must comply with additional Listing Rules, including continuous disclosure obligations, depending on which exchange they are listed on.
Unlisted public companies aren’t subject to these requirements, but they must still comply with the governance and reporting obligations under Australian law.
Public companies limited by guarantee are a good example. Many charities, member organisations, professional associations, and sporting bodies use this structure despite having no intention of listing on the ASX or issuing publicly traded shares.
Public company vs private company
Here’s an overview of how private and public companies differ in Australia.
| Feature | Proprietary company / private company | Public company |
|---|---|---|
| Common name ending | Pty Ltd | Ltd |
| Shareholder limit | Up to 50 non-employee shareholders | No equivalent proprietary shareholder cap |
| Public share offers | Generally, it cannot offer shares to the public | May be able to raise funds from the public, subject to applicable rules |
| ASX or other listing | Not listed | Can be listed or unlisted |
| Reporting obligations | Depends on whether the company is small or large | Generally, higher reporting and governance obligations |
| Company secretary | Not always required | At least one secretary ordinarily resident in Australia |
| Common use | Small businesses, startups, private companies | Larger companies, public fundraising, charities, not-for-profits |
| Governance | Usually simpler | More formal governance expectations |
What are the reporting obligations for public and private companies?
Your reporting obligations will depend on your legal business structure and size. The table below outlines the general obligations (though it’s not exhaustive).
| Obligation | Proprietary company | Public company |
|---|---|---|
| ASIC annual review | Required | Required |
| Solvency resolution | Required unless exempt due to the lodgement circumstances | Different governance and reporting obligations may apply |
| Financial reports | Depends on whether the company is small or large | Generally, more extensive reporting |
| Audit | Usually depends on size, control and statutory requirements | More likely required |
| Public disclosure | More limited | Higher for listed and many public companies |
| Governance records | Required | More formal governance expectations |
Note: Reporting, audit, and financial reporting requirements can change. Verify current ASIC requirements before proceeding.
What are the director and secretary requirements?
Both proprietary and public companies must satisfy minimum officeholder requirements under Australian law, but public companies face stricter obligations.
Proprietary companies must appoint the minimum number of directors required under the Corporations Act.
Public companies must appoint at least one company secretary who ordinarily resides in Australia, and follow more formal governance processes, such as board procedures, documentation, and ongoing compliance.
Both directors and company secretaries have important legal duties relating to corporate governance, record keeping and compliance.
Regardless of company type, directors should ensure company details remain accurate and up to date with ASIC at all times.
When should you choose a proprietary company?
A proprietary company is often suitable when the business:
- It is a small or family business.
- Operates as a privately owned company.
- It is an early-stage startup before a broad fundraising round.
- Has relatively few shareholders.
- Doesn’t need to raise funds from the public.
- Prefers simpler governance requirements.
- Wants the protection of a separate legal entity with limited liability.
For many Australian businesses, a Pty Ltd company remains the most practical and cost-effective structure during the early stages of growth.
When should you choose a public company?
A public company may be more appropriate where the organisation:
- Intends to raise funds from the public.
- It is preparing for a future ASX listing.
- Expects a large or expanding investor base.
- Operates as a charity or not-for-profit.
- Requires a public company limited by guarantee.
- Benefits from more formal governance arrangements.
- Has outgrown the limitations of proprietary companies.
- Has a broad membership base rather than a small ownership group.
Although public companies involve greater regulatory obligations, they also provide greater flexibility for expansion and investment.
Can you convert a proprietary company into a public company?
Yes. In many cases, a proprietary company can be converted into a public company by complying with the Corporations Act and ASIC requirements.
Conversion may become necessary before:
- Raising funds from the public
- Pursuing an ASX listing
- Expanding beyond proprietary shareholder limits
- Adopting a broader membership structure.
When converting, you may need to:
- Review or amend the company’s constitution
- Get approval from shareholders
- Follow new governance and reporting obligations
Because conversion can have legal, accounting, and taxation consequences, businesses should obtain professional advice before proceeding.
Public vs private company checklist
Before choosing a company structure, consider the following questions:
- How many shareholders or members will the company have?
- Will the company offer shares to the public?
- Does the company need external investment?
- Is an ASX listing part of the long-term strategy?
- Is the organisation a commercial business, charity or member organisation?
- What reporting obligations can the business realistically manage?
- Does the company need a constitution?
- Are shareholder agreements required?
- Who will act as directors and the company secretary?
- Will audited financial reports be required?
- Will the chosen structure still suit the business in two to three years?
- Should legal and accounting advice be obtained before registration?
Answering these questions early can help avoid costly restructures as the business grows.
When should you get legal advice?
Professional legal advice can be particularly valuable when:
- Choosing between a proprietary and a public company before registration
- Issuing shares to investors
- Preparing or reviewing a shareholder agreement
- Drafting or updating a company constitution
- Converting from a proprietary company to a public company
- Preparing for an ASX listing
- Establishing a public company limited by guarantee
- Starting a charity or not-for-profit
- Approaching the proprietary company shareholder cap
- Raising capital from investors
- Understanding governance, reporting or compliance obligations.
Lawpath can assist Australian founders and directors with registering a company, preparing constitutions and shareholder agreements, reviewing company structures, and obtaining legal advice before establishing or converting a company.
FAQs
What is the difference between a public and a private company in Australia?
A proprietary (private) company is limited to 50 non-employee shareholders and generally cannot raise funds from the public. In contrast, a public company can have unlimited shareholders, may raise capital from the public, and is subject to more extensive governance and reporting obligations.
What is a private company in Australia?
In Australia, a private company is usually a proprietary company (Pty Ltd). It is privately owned, generally cannot offer shares to the public, and is commonly used by small businesses, startups, and family businesses.
Is a Pty Ltd company public or private?
A Pty Ltd company is a proprietary (private) company. It is not a public company and cannot generally raise funds by offering shares to the public.
Does a public company have to be listed?
No. A public company may be listed or unlisted. Many charities, member organisations, and other public companies are not listed on the ASX or other exchange.
Can a private company sell shares to the public?
Generally, no, although they may issue shares privately in accordance with the Corporations Act and other applicable requirements.
How many shareholders can a private company have in Australia?
A proprietary company can have up to 50 non-employee shareholders. Employee shareholders are generally excluded from this cap.
Is a public company better than a private company?
Neither structure is inherently better. The appropriate choice depends on factors such as fundraising plans, ownership structure, governance needs, reporting obligations, and long-term business objectives.
Can a private company become a public company?
Yes, by complying with the Corporations Act, obtaining any required approvals, and meeting the governance and reporting obligations that apply to public companies.
