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A privately held company or private company is a company which does not offer or trade its company
stock In finance, stock (also capital stock) consists of all of the shares In financial markets A financial market is a market in which people trade financial securities and derivatives at low transaction costs. Some of the securities i ...

stock
(
shares In financial markets A financial market is a market in which people trade financial securities and derivatives at low transaction costs. Some of the securities include stocks and bonds, raw materials and precious metals, which are known ...
) to the general public on the
stock market A stock market, equity market, or share market is the aggregation of buyers and sellers of stock In finance, stock (also capital stock) consists of all of the shares In financial markets A financial market is a market in whic ...

stock market
exchanges, but rather the company's stock is offered, owned and traded or exchanged privately or
over-the-counter Over-the-counter (OTC) drugs are medicine Medicine is the Art (skill), art, science, and Praxis (process) , practice of caring for a patient and managing the diagnosis, prognosis, Preventive medicine, prevention, therapy, treatment or Palliat ...
. In the case of a close 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, publicly traded company, publicly held company, publicly listed company, or public limited company A public limited company (legally abbreviated to PLC or plc) is a type of public company under United Kingdom company law, som ...
counterparts, private companies have major importance in the world's
economy An economy (; ) is an area of the production Production may be: Economics and business * Production (economics) * Production, the act of manufacturing goods * Production, in the outline of industrial organization, the act of making products ...

economy
. 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 The Forbes family is one of the Boston Brahmins—a wealthy extended American family long prominent in Boston, Massachusett ...

Forbes
'' 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 An economy (; ) is an area of the production Production may be: Economics and business * Production (economics) * Production, the act of manufacturing goods * Production, in the outline of indust ...
.


State ownership vs. private ownership vs. cooperative ownership

Private ownership of productive assets differs from state ownership or collective ownership (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) or government-owned enterprise (GOE) is a business enterprise where the government or state has significant control through full, majority, or significant minority ownership. Defining characteristics of SOEs are ...
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 financial markets A financial market is a market in which people trade financial securities and derivatives at low transaction costs. Some of the securities include stocks and bonds, raw materials and precious metals, which are known ...
or interests are not
publicly traded A public company, publicly traded company, publicly held company, publicly listed company, or public limited company A public limited company (legally abbreviated to PLC or plc) is a type of public company under United Kingdom company law, som ...
. 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 privately owned 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 pu ...
es are privately held.
Subsidiaries A subsidiary, subsidiary company or daughter company is a company A company, abbreviated as co., is a Legal personality, legal entity representing an association of people, whether Natural person, natural, Legal personality, legal or a mixture ...
and
joint venture A joint venture (JV) is a business entity created by two or more parties, generally characterized by shared ownership Equity sharing is another name for shared ownership or ''co-ownership (disambiguation), co-ownership''. It takes one property, ...
s of publicly traded companies (for example,
General Motors General Motors Company (GM) is an American multinational Multinational may refer to: * Multinational corporation, a corporate organization operating in multiple countries * Multinational force, a military body from multiple countries * Multinat ...

General Motors
'
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 General Motors Company (GM) is an American Multinational corp ...
), 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 ...

corporation
s,
limited companies Limited may refer to: *Limited company In a limited company, the liability of members or subscribers of the company A company, abbreviated as co., is a Legal personality, legal entity representing an association of people, whether Natural pers ...
,
limited liability companies A limited liability company (LLC) is the US-specific form of a private limited company A private limited company is any type of business entity in Privately held company, "private" ownership used in many jurisdictions, in contrast to a Pub ...
, 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 partner A business partner is a commercial entity with which another commercial entity has some form of Business alliance, alliance. This relationship may be a contractual, exclus ...

partnership
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 business entity I ...
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 A private limited company is any type of business entity in Privately held company, "private" ownership used in many jurisdictions, in contrast to a Public company, ...
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, (abbreviated as 'Pty.'), is a form of privately held company A privately held company or private company is a company which does not offer or trade its company stock In finance, stock (also capital stock) consists ...
(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, under the Ministry of Finance and 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 Transparency, transparence or transparent most often refer to transparency and translucency, the physical property of allowing the transmission of light through a material. They may also refer to: Literal uses * Transparency (photography), a sti ...
, 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) (the Corporations Act, or CA 2001) is an Act of the Commonwealth of Australia Australia, officially the Commonwealth of Australia, is a Sovereign state, sovereign country comprising the mainland of the A ...
requires that publicly traded companies file certain documents relating to their
annual general meeting Annual meeting in 2015 of the ''Friends of the Ulriksdal Palace Theatre'' chaired by Princess Christina, Mrs. Magnuson An annual general meeting (AGM, also known as the annual meeting) is a meeting of the general membership of an organization ...
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 ...
. 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
FASB The Financial Accounting Standards Board (FASB) is a private standard-setting body whose primary purpose is to establish and improve Generally Accepted Accounting Principles Publicly traded companies typically are subject to the most rigorous ...
.(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 name, domain. Hyperlinks are considered either "external" or "internal" depending on their target or de ...
)
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, Un ...
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. It is headquartered in Short Hills, New Jersey, Short Hills, a community in Millburn, New Jersey. The company offers a ...
. 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 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 en ...
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) (, codified at et seq.) is a law governing the secondary trading of securities (stock Stock (also capital stock) is all of the shares into which ow ...
, 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 A statute is a formal written enactment of a legislature, legislative authority that governs the legal entities of a c ...
, 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
collectively
, 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 Administration ...
. Private enterprises comprise the
private sector The private sector is the part of the economy An economy (; ) is an area of the production Production may be: Economics and business * Production (economics) * Production, the act of manufacturing goods * Production, in the outline of indust ...
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 An economic system, or economic order, is a system A system is a group of interacting Interaction is a kind of action that occurs as two or more objects have an effect upon one another. The idea o ...

capitalism
. This contrasts with
socialism Socialism is a political Politics (from , ) is the set of activities that are associated with Decision-making, making decisions in Social group, groups, or other forms of Power (social and political), power relations between individuals, ...
, 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, Un ...
or by all of the community in common. The act of taking assets into the private sector is referred to as
privatization Privatization (or 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 heav ...
. A privately owned enterprise is one form that
private property Private property is a legal designation for the ownership of property Property is a system of rights that gives people legal control of valuable things, and also refers to the valuable things themselves. Depending on the nature of the prope ...
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 business entity I ...
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 Liability may refer to: Law * Legal liability, in both civil and criminal law ** Public liability, part of the law of tort which focuses on civil wrongs ** Product liability, the area of law in which manufacturers, distributors, suppliers, retai ...
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 partner A business partner is a commercial entity with which another commercial entity has some form of Business alliance, alliance. This relationship may be a contractual, exclus ...

partnership
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 A partnership is an arrangement where parties, known as business partner A business partner is a commercial entity with which another commercial entity has some form of Business alliance, a ...
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 ...

corporation
is a for-profit,
limited liability Limited liability is a legal status where a person's financial liability Liability may refer to: Law * Legal liability, in both civil and criminal law ** Public liability, part of the law of tort which focuses on civil wrongs ** Product liabi ...
or
unlimited liability An unlimited company or private unlimited company is a hybrid company A company, abbreviated as co., is a Legal personality, legal entity representing an association of people, whether Natural person, natural, Legal personality, legal or a mix ...
entity that has a separate
legal personality In law Law is a system A system is a group of Interaction, interacting or interrelated elements that act according to a set of rules to form a unified whole. A system, surrounded and influenced by its environment, is described by ...
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 is a group of people who jointly supervise the activities of an organization An organization, or organisation (Commonwealth English The use of the English language English is a West Germanic languages, W ...
, 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 corporation may be privately held ("close", or closely held—that is, held by a few people) or publicly traded.


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 personality, legal entity representing an association of people, whether Natural person, natural, Legal person, legal or ...
*
Private company limited by shares A private company limited by shares is a class of private limited company A private limited company is any type of business entity in Privately held company, "private" ownership used in many jurisdictions, in contrast to a Public company, ...
*
Private equity Private equity (PE) typically refers to investment funds, generally organized as limited partnerships, that buy and restructure companies that are not publicly traded. Private equity is a type of equity and one of the asset classes consisti ...
*
Public company A public company, publicly traded company, publicly held company, publicly listed company, or public limited company is a company whose ownership is organized via shares of share capital, stock which are intended to be freely traded on a stock ...
*
Unlisted public company An unlisted public company is a public company A public company, publicly traded company, publicly held company, publicly listed company, or public limited company is a whose ownership is organized via shares of which are intended to be fre ...


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