Companies can also be classified according to whether they are public or private. They can also be subdivided by their liability status. These classifications refer to the liability of the shareholders to contribute money when the company has insufficient funds to cover its debts. A proprietary company can have no more than 50 non-employee shareholders, and its constitution must contain rules that restrict the right to transfer shares, and that forbid the company to make public offers for its shares. Public companies are all companies that are not proprietary.
Public companies are subject to more onerous accounting and financial reporting requirements.
This material will focus on private companies. Generally, for small to medium businesses this will be the most appropriate form of company. If you decide to take advantage of the many benefits of the corporate form and incorporate your business you have to choose between starting a proprietary or public company. Unless you can foresee a need to offer shares to the public in order to raise funds, the costs and extra requirements involved with running a public company suggest that the proprietary form is more suitable. Whether yours is a small or large proprietary company depends on the circumstances of your business.