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A privately held company (or simply a private company) is a company whose shares and related rights or obligations are not offered for public subscription or publicly negotiated in the respective listed markets, but rather the company's stock is offered, owned, traded, exchanged privately, or
over-the-counter Over-the-counter (OTC) drugs are medicines sold directly to a consumer without a requirement for a prescription from a healthcare professional, as opposed to prescription drugs, which may be supplied only to consumers possessing a valid pres ...
. In the case of a closed corporation, there are a relatively small number of
shareholder A shareholder (in the United States often referred to as stockholder) of a corporation is an individual or legal entity (such as another corporation, a body politic, a Trust law, trust or partnership) that is registered by the corporation as the ...
s or company members. Related terms are closely-held corporation, unquoted company, and unlisted company. Though less visible than their
publicly traded A public company is a company whose ownership is organized via shares of share capital, stock which are intended to be freely traded on a stock exchange or in Over-the-counter (finance), over-the-counter markets. A public (publicly traded) comp ...
counterparts, private companies have major importance in the world's
economy An economy is an area of the Production (economics), production, Distribution (economics), distribution and trade, as well as Consumption (economics), consumption of Goods (economics), goods and Service (economics), services. In general, it is ...
. In 2008, the 441 largest private companies in the United States accounted for ($1.8 trillion) in revenues and employed 6.2 million people, according to ''Forbes''. In 2005, using a substantially smaller pool size (22.7%) for comparison, the 339 companies on ''
Forbes ''Forbes'' () is an American business magazine owned by Integrated Whale Media Investments and the Forbes family (publishers), Forbes family. Published eight times a year, it features articles on finance, industry, investing, and marketing ...
'' survey of closely held U.S. businesses sold a trillion dollars' worth of goods and services (44%) and employed four million people. In 2004, the ''Forbes'' count of privately held U.S. businesses with at least $1 billion in revenue was 305. Separately, all non-government-owned companies are considered private enterprise. This sense includes both publicly traded and privately held companies, as their investors are individuals in the
private sector The private sector is the part of the economy, sometimes referred to as the citizen sector, which is owned by private groups, usually as a means of establishment for profit (economics), profit or Non Profit, non profit, rather than being owned by t ...
.


State ownership vs. private ownership vs. cooperative ownership

Private ownership of productive assets differs from
state ownership State ownership, also called government ownership and public ownership, is the ownership of an Industry (economics), industry, asset, or Business, enterprise by the State (polity), state or a public body representing a community, as opposed to a ...
or
collective ownership Collective ownership is the ownership of property by all members of a group. The breadth or narrowness of the group can range from a whole society to a set of coworkers in a particular Business, enterprise (such as one collective farming, collecti ...
(as in worker-owned companies). This usage is often found in former Eastern Bloc countries to differentiate from former
state-owned enterprise A state-owned enterprise (SOE) is a Government, government entity which is established or nationalised by the ''national government'' or ''provincial government'' by an executive order or an act of legislation in order to earn Profit (econom ...
s, but it may be used anywhere when contrasting to a state-owned or a collectively owned company. In the United States, the term privately held company is more often used to describe for-profit enterprises whose shares are not traded on the stock market.


Ownership of stock

In countries with public trading markets, a privately held business is generally taken to mean one whose ownership
shares In finance, financial markets, a share is a unit of Equity (finance), equity ownership in the capital stock of a corporation, and can refer to units of mutual funds, limited partnerships, and real estate investment trusts. Share capital refers t ...
or interests are not publicly traded. Often, privately held companies are owned by the company founders or their families and heirs or by a small group of investors. Sometimes employees also hold shares of private companies. Most
small business Small businesses are types of corporations, partnerships, or sole proprietorships which have fewer employees and/or less annual revenue than a regular-sized business or corporation. Businesses are defined as "small" in terms of being able to ap ...
es are privately held.
Subsidiaries A subsidiary, subsidiary company or daughter company is a company (law), company owned or controlled by another company, which is called the parent company or holding company. Two or more subsidiaries that either belong to the same parent company ...
and
joint venture A joint venture (JV) is a business entity created by two or more parties, generally characterized by shared ownership, shared returns and economic risk, risks, and shared governance. Companies typically pursue joint ventures for one of four rea ...
s of publicly traded companies (for example,
General Motors The General Motors Company (GM) is an American Multinational corporation, multinational Automotive industry, automotive manufacturing company headquartered in Detroit, Michigan, United States. It is the largest automaker in the United States and ...
'
Saturn Corporation The Saturn Corporation, also known as Saturn LLC, was an American automobile manufacturer, a registered trademark established on January 7, 1985, as a subsidiary of General Motors. The company was an attempt by GM to compete directly with Automot ...
), unless shares in the subsidiary itself are traded directly, have characteristics of both privately held companies and publicly traded companies. Such companies are usually subject to the same reporting requirements as privately held companies, but their assets, liabilities, and activities are also included in the reports of their parent companies, as required by the accountancy and securities industry rules relating to groups of companies.


Form of organization

Private companies may be called
corporation A corporation is an organization—usually a group of people or a company—authorized by the State (polity), state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal ...
s, limited companies,
limited liability companies A limited liability company (LLC for short) is the United States of America, US-specific form of a private limited company. It is a business structure that can combine the Flow-through entity, pass-through taxation of a partnership or sole p ...
, unlimited companies, or other names, depending on where and how they are organized and structured. In the United States, but not generally in the United Kingdom, the term is also extended to
partnership A partnership is an arrangement where parties, known as business partners, agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, business entity, businesses, interest-based organizations, schoo ...
s,
sole proprietorship A sole proprietorship, also known as a sole tradership, individual entrepreneurship or proprietorship, is a type of enterprise owned and run by one person and in which there is no legal distinction between the owner and the Types of business entity ...
s or business trusts. Each of these categories may have additional requirements and restrictions that may impact reporting requirements, income tax liabilities, governmental obligations, employee relations, marketing opportunities, and other business obligations and decisions. In many countries, there are forms of organization which are restricted to and are commonly used by private companies, for example, the
private company limited by shares A private company limited by shares is a class of private limited company incorporated under the laws of English law, England and Wales, Northern Irish law, Northern Ireland, Scots law, Scotland, certain Commonwealth of Nations, Commonwealth c ...
in the United Kingdom (abbreviated ''Ltd'') or
unlimited company An unlimited company or private unlimited company is a hybrid company (corporation) incorporated with or without a share capital (and similar to its limited liability, limited company counterpart) but where the legal liability of the members or ...
and the
proprietary limited company A proprietary company, the characteristic of which is abbreviated as "Pty", is a form of privately held company in Australia, Namibia and South Africa that is either limited company, limited or unlimited company, unlimited. However, unlike a pu ...
(abbreviated ''Pty Ltd'') or unlimited proprietary company (abbreviated ''Pty'') in South Africa and Australia. In India, private companies are registered by the
Registrar of Companies A company register is a register of organizations in the jurisdiction they operate under. A statistical business register has a different purpose than a company register. While a commercial/trade register serves a purpose of protection, accounta ...
, under the Ministry of Corporate Affairs. Indian private companies must contain the word Private Limited at the end of their names.


Reporting obligations and restrictions

Privately held companies generally have fewer or less comprehensive reporting requirements and obligations for transparency, via annual reports, etc. than publicly traded companies do. For example, in the United States, unlike in Europe, privately held companies are not generally required to publish their
financial statements Financial statements (or financial reports) are formal records of the financial activities and position of a business, person, or other entity. Relevant financial information is presented in a structured manner and in a form which is easy to un ...
. By not being required to disclose details about their operations and financial outlook, private companies are not forced to disclose information that may potentially be valuable to competitors and can avoid the immediate erosion of customer and stakeholder confidence in the event of financial duress. Further, with limited reporting requirements and shareholder expectations, private firms are afforded a greater operational flexibility by being able to focus on long-term growth rather than quarterly earnings. In addition, private company executives may steer their ships without shareholder approval, allowing them to take significant action without delays. In Australia, Part 2E of the ''
Corporations Act 2001 The ''Corporations Act 2001'' (Cth) is an Act of Parliament, Act of the Parliament of Australia, which sets out the laws dealing with business entity, business entities in the Commonwealth of Australia. The company is the Act's primary focus, b ...
'' requires that publicly traded companies file certain documents relating to their annual general meeting with the
Australian Securities and Investments Commission The Australian Securities and Investments Commission (ASIC) is an independent commission of the Australian Government tasked as the national corporate regulator. ASIC's role is to regulate company and financial services and enforce laws to pro ...
(ASIC). There is a similar requirement for large proprietary companies, which are required to lodge Form 388H to the ASIC containing their financial report. In the United States, private companies are held to different accounting auditing standards than are public companies, overseen by the Private Company Counsel division of the
Financial Accounting Standards Board The Financial Accounting Standards Board (FASB) is a private standard-setting body whose primary purpose is to establish and improve Generally Accepted Accounting Principles (GAAP) within the United States in the public's interest. The Securi ...
.(see
external links An internal link is a type of hyperlink on a web page to another page or resource, such as an image or document, on the same website or domain. Hyperlinks are considered either "external" or "internal" depending on their target or destination ...
)
Researching private companies and private companies' financials in the United States can involve contacting the secretary of state for the
state State may refer to: Arts, entertainment, and media Literature * ''State Magazine'', a monthly magazine published by the U.S. Department of State * The State (newspaper), ''The State'' (newspaper), a daily newspaper in Columbia, South Carolina, U ...
of incorporation (or for LLC or partnership, state of formation), or using specialized private company databases such as
Dun & Bradstreet The Dun & Bradstreet Corporation is an American company that provides commercial data, analytics, and insights for businesses. Headquartered in Jacksonville, Florida Jacksonville is a city located on the Atlantic coast of northeast Florida, ...
. Other companies, like Sageworks, provide aggregated data on privately held companies, segmented by industry code. Privately held companies also sometimes have restrictions on how many
shareholders A shareholder (in the United States often referred to as stockholder) of a corporation is an individual or legal entity (such as another corporation, a body politic, a Trust law, trust or partnership) that is registered by the corporation as the ...
they may have. For example, the U.S.
Securities Exchange Act of 1934 The Securities Exchange Act of 1934 (also called the Exchange Act, '34 Act, or 1934 Act) (, Codification (law), codified at et seq.) is a law governing the secondary market, secondary trading of securities (stocks, Bond (finance), bonds, and de ...
, section 12(g), limits a privately held company, generally, to fewer than 2000 shareholders, and the U.S.
Investment Company Act of 1940 The Investment Company Act of 1940 (commonly referred to as the '40 Act) is an act of Congress An Act of Congress is a statute enacted by the United States Congress The United States Congress is the legislature of the federal governme ...
, requires registration of investment companies that have more than 100 holders. In Australia, section 113 of the ''Corporations Act 2001'' limits a privately held company to fifty non-employee shareholders.


Privately owned enterprise

A privately owned enterprise is a commercial enterprise owned by private investors, shareholders or owners (usually
collectively A collective is a group of entities that share or are motivated by at least one common issue or interest, or work together to achieve a common objective. Collectives can differ from cooperatives in that they are not necessarily focused upon an ...
, but they can be owned by a single individual), and is in contrast to state institutions, such as publicly owned enterprises and
government agencies A government or state agency, sometimes an appointed commission, is a permanent or semi-permanent organization in the machinery of government that is responsible for the oversight and administration of specific functions, such as an Administratio ...
. Private enterprises comprise the
private sector The private sector is the part of the economy, sometimes referred to as the citizen sector, which is owned by private groups, usually as a means of establishment for profit (economics), profit or Non Profit, non profit, rather than being owned by t ...
of an economy. An economic system that 1) contains a large private sector where privately run businesses are the backbone of the economy, and 2) business surplus is controlled by the owners, is referred to as
capitalism Capitalism is an economic system based on the private ownership of the means of production and their operation for profit. Central characteristics of capitalism include capital accumulation, competitive markets, price system, pr ...
. This contrasts with
socialism Socialism is a left-wing Economic ideology, economic philosophy and Political movement, movement encompassing a range of economic systems characterized by the dominance of social ownership of the means of production as opposed to Private prop ...
, where industry is owned by the
state State may refer to: Arts, entertainment, and media Literature * ''State Magazine'', a monthly magazine published by the U.S. Department of State * The State (newspaper), ''The State'' (newspaper), a daily newspaper in Columbia, South Carolina, U ...
or by all of the community in common. The act of taking assets into the private sector is referred to as
privatization Privatization (also privatisation in British English) can mean several different things, most commonly referring to moving something from the public sector into the private sector. It is also sometimes used as a synonym for deregulation when ...
. A privately owned enterprise is one form that
private property Private property is a legal designation for the ownership of property by non-governmental legal entities. Private property is distinguishable from public property and personal property, which is owned by a state entity, and from collective ...
may take.


Types of privately owned business

* Sole proprietorship: A
sole proprietorship A sole proprietorship, also known as a sole tradership, individual entrepreneurship or proprietorship, is a type of enterprise owned and run by one person and in which there is no legal distinction between the owner and the Types of business entity ...
is a business owned by one person. The owner may operate on his or her own or may employ others. The owner of the business has total and unlimited personal liability of the debts incurred by the business. This form is usually relegated to small businesses. * Partnership: A
partnership A partnership is an arrangement where parties, known as business partners, agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, business entity, businesses, interest-based organizations, schoo ...
is a form of business in which two or more people operate for the common goal of making profit. Each partner has total and unlimited personal liability of the debts incurred by the partnership. There are three typical different types of classifications for partnerships:
general partnership A general partnership, the basic form of partnership under common law, is in most countries an association of persons or an unincorporated company with the following major features: *Must be created by agreement, proof of existence and estoppel. ...
s,
limited partnership A limited partnership (LP) is a form of partnership similar to a general partnership except that while a general partnership must have at least two general partners (GPs), a limited partnership must have at least one GP and at least one limited p ...
s, and
limited liability partnership A limited liability partnership (LLP) is a partnership in which some or all partners (depending on the jurisdiction) have limited liabilities. It therefore can exhibit elements of partnerships and corporations. In an LLP, each partner is not ...
s. * Corporation: A business
corporation A corporation is an organization—usually a group of people or a company—authorized by the State (polity), state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal ...
is a for-profit,
limited liability Limited liability is a legal status in which a person's financial liability is limited to a fixed sum, most commonly the value of a person's investment in a corporation, company or partnership. If a company that provides limited liability to it ...
or unlimited liability entity that has a separate
legal personality Legal capacity is a quality denoting either the legal aptitude of a person to have rights and liabilities (in this sense also called transaction capacity), or altogether the personhood itself in regard to an entity other than a natural pers ...
from its members. A corporation is owned by one or more
shareholder A shareholder (in the United States often referred to as stockholder) of a corporation is an individual or legal entity (such as another corporation, a body politic, a Trust law, trust or partnership) that is registered by the corporation as the ...
s and is overseen by a
board of directors A board of directors (commonly referred simply as the board) is an Committee#Executive committee, executive committee that jointly supervises the activities of an organization, which can be either a for-profit or a nonprofit organization such a ...
, which hires the business's managerial staff. Corporate models have also been applied to the state sector in the form of
government-owned corporations A state-owned enterprise (SOE) is a government entity which is established or nationalised by the ''national government'' or ''provincial government'' by an executive order or an act of legislation in order to earn profit Profit may ref ...
. A corporation may be privately held ("close", or closely held—that is, held by a few people) or publicly traded. * Hybrid Types: Some countries, like Germany, the United States, and the United Kingdom have created a hybrid type of entity that has characteristics of both a corporation and a partnership. In Germany, it is called a Gesellschaft mit beschränkter Haftung (Gmbh), in the United States it is called a Limited Liability Company (LLC), and in the United Kingdom it is called a Limited Liability Partnership (LLP). It is considered a corporate body similar to a corporation but is typically taxed like a partnership.


See also

*
Limited company In a limited company, the liability of members or subscribers of the company A company, abbreviated as co., is a legal entity representing an association of people, whether natural, legal or a mixture of both, with a specific objective ...
*
Private company limited by shares A private company limited by shares is a class of private limited company incorporated under the laws of English law, England and Wales, Northern Irish law, Northern Ireland, Scots law, Scotland, certain Commonwealth of Nations, Commonwealth c ...
*
Private equity In the field of finance, the term private equity (PE) refers to investment funds, usually limited partnerships (LP), which buy and restructure financially weak companies that produce goods and provide services. A private-equity fund is both a typ ...
*
Public company A public company is a company whose ownership is organized via shares of share capital, stock which are intended to be freely traded on a stock exchange or in Over-the-counter (finance), over-the-counter markets. A public (publicly traded) comp ...
* Unlisted public company


References


External links


Private Company Council
, a part of the
Financial Accounting Standards Board The Financial Accounting Standards Board (FASB) is a private standard-setting body whose primary purpose is to establish and improve Generally Accepted Accounting Principles (GAAP) within the United States in the public's interest. The Securi ...
{{DEFAULTSORT:Privately Held Company Types of business entity Private sector